THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 
_____ 

ARRANGEMENT OF SECTIONS 
______ 

PRELIMINARY 

SECTIONS 

1.  Short title, extent and commencement. 
2.  Definitions. 
2A. Interpretation of certain words and expressions. 

RECOGNISED STOCK EXCHANGE 

3.  Application for recognition of stock exchanges. 
4.  Grant of recognition to stock exchanges. 
4A. Corporatisation and demutualisation of stock exchanges. 
4B. Procedure for corporatisation and demutualisation. 
5.  Withdrawal of recognition. 
6.  Power of Central Government to call for periodical returns or direct inquiries to be                   

made. 

7.  Annual reports to be furnished to the Central Government by stock exchanges. 
7A. Power of recognised stock exchange to make rules restricting voting rights, etc. 
8.  Power of Central Government to direct rules to be made or to make rules. 

8A. Clearing corporation. 

9.  Power of recognised stock exchanges to make bye-laws. 
10.  Power of Securities and Exchange Board of India to make or amend bye-laws of recognised stock 

exchanges. 

11.  Power of Central Government to supersede governing body of a recognised stock exchange. 

12. Power to suspend business of recognised stock exchanges. 

12A. Power to issue directions. 

CONTRACTS AND OPTIONS IN SECURITIES 

13.  Contracts in notified areas illegal in certain circumstances. 

13A. Additional trading floor. 

14.  Contracts in notified areas to be void in certain circumstances. 
15.  Members may not act as principals in certain circumstances. 
16.  Power to prohibit contracts in certain cases. 
17.  Licensing of dealers in securities in certain areas. 

17A. Public issue and listing of securities referred to in sub-clause (ie) of clause (h) of   section 2. 

18.  Exclusion of spot delivery contracts from sections 13, 14, 15 and 17. 
18A. Contracts in derivatives. 

19.  Stock exchanges other than recognised stock exchanges prohibited. 
20.  [Omitted.]. 

LISTING OF SECURITIES BY PUBLIC COMPANIES 

21. Conditions for listing. 

21A. Delisting of securities. 

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SECTIONS 

22. Right of appeal against refusal by stock exchanges to list securities of public companies. 

22A. Right of appeal to Securities Appellate Tribunal against refusal of stock exchange to list 

securities of public companies. 

22B. Procedure and powers of Securities Appellate tribunal. 

22C. Right to legal representation. 

22D. Limitation. 

22E. Civil Court not to have jurisdiction. 

22F.Appeal to High Court. 

PENALTIES AND PROCEDURE 

23.  Penalties. 

23A. Penalty for failure to furnish information, return, etc. 

23B. Penalty for failure by any person to enter into an agreement with clients. 

23C. Penalty for failure to redress Investors grievances. 

23D. Penalty for failure to segregate securities or moneys of client or clients. 

23E. Penalty for failure to comply with provision of listing conditions or delisting conditions or 

grounds. 

23F. Penalty for excess dematerialisation or delivery of unlisted securities. 

23G. Penalty for failure to furnish periodical returns, etc. 

23GA. Penalty for failure to conduct business in accordance with rules, etc. 

23H. Penalty for contravention where no separate penalty has been provided. 

23-I. Power to adjudicate. 

23J. Factors to be taken into account while adjudicating quantum of penalty. 

23JA. Settlement of administrative and civil proceedings. 

23JB. Recovery of amounts. 

23JC. Continuance of proceedings. 

23K. Crediting sum realised by way of penalties to Consolidated Fund of India. 

23L. Appeal to Securities Appellate Tribunal. 

23M. Offences. 

23N. Composition of certain offences. 

23-O. Power to grant immunity. 

24. Contravention by companies. 

25. Certain offences to be cognizable. 

26. Cognizance of offences by courts. 

26A. Establishment of Special Courts. 

26B. Offences triable by Special Courts. 

26C. Appeal and Revision. 

26D. Application of Code to proceedings before Special Court. 

26E. Transitional provisions. 

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SECTIONS 

27. Title to dividends. 

MISCELLANEOUS 

27A. Right to receive income from collective investment scheme. 

27B. Right to receive income from mutual fund. 

28. Act not to apply in certain cases. 

29. Protection of action taken in good faith. 

29A. power to delegate. 

29B. Powers of the Securities and Exchange Board of India not to apply to International Financial 

Services Centre. 

30. Power to make rules. 

30A. Special provisions related to commodity derivatives. 

30B. Special provisions related to pooled investment vehicle. 

31. Power of Securities and Exchange Board of India to make regulations. 

32. Validation of certain acts. 

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THE SECURITIES CONTRACTS (REGULATION) ACT, 1956 

ACT NO. 42 OF 1956 

An  Act  to  prevent  undesirable  transactions  in  securities  by  regulating  the  business  of  dealing 

therein, by 1*** providing for certain other matters connected therewith. 

BE it enacted by Parliament in the Seventh Year of the Republic of India as follows:— 

1.  Short  title,  extent  and  commencement.—(1)  This  Act  may  be  called  the  Securities  Contracts 

PRELIMINARY 

[4th September, 1956.] 

(Regulation) Act, 1956. 

(2) It extents to the whole of India. 

(3)  It  shall  come  into  force  on  such  date2 as  the  Central  Government  may,  by  notification  in  the 

Official Gazette, appoint. 

2. Definitions.—In this Act, unless the context otherwise requires,— 

(a)“Contract”means a contract for or relating to the purchase or sale of securities; 

3[(aa)  “corporatisation”  means  the  succession  of  a  recognised  stock  exchange,  being  a  body  of 
individuals or a society registered under the Societies Registration Act, 1860 (21 of 1860), by another 
stock exchange, being a company incorporated for the purpose of assisting, regulating or controlling 
the business of buying, selling or dealing in securities carried on by such individuals or society; 

(ab)  “demutualisation”  means  the  segregation  of  ownership  and  management  from  the  trading 
rights of the members of a recognised stock exchange in accordance with a scheme approved by the 
Securities and Exchange Board of India;] 

4[5[(ac)] “derivative” includes— 

(A) a security derived from a debt instrument, share, loan, whether secured or unsecured, risk 

instrument or contract for differences or any other form of security; 

(B)  a  contact  which  derives  its  value  from  the  prices,  or  index  of  prices,  of  underlying 

securities;] 

6[(C) commodity derivatives; and 

(D) such other instruments as may be declared by the Central Government to be derivatives;] 

(b)  “Government  security”  means  a  security  created  and  issued,  whether  before  or  after  the 
commencement  of  this  Act,  by  the  Central  Government  or  a  State  Government  for  the  purpose  of 
raising a public loan and having one of the forms specified in clause (2) of section 2 of the Public 
Debt Act, 1944 (13 of 1944); 

6[(bb)  “goods”  mean  every  kind  of  movable  property  other  than  actionable  claims,  money  and 

securities; 

(bc) “commodity derivative” means a contract— 

(i)  for  the  delivery  of  such  goods,  as  may  be  notified  by  the  Central  Government  in  the 

Official Gazette, and which is not a ready delivery contract; or 

1. The words “by prohibiting options” omitted by Act 9 of 1995, s. 18 (w.e.f 25-1-1995). 
2. 20th February, 1957, vide notification No. S.R.O. 528, dated 16th February, 1957, see Gazette of India, Extraordinary, Part II, 
sec. 3 this Act has been extended in its application to the Union territory Goa, Daman and Diu by the Act 11 of 1963, s. 3 and 
the Schedule (w.e.f 1-2-1965). 

3. Ins. by Act 1 of 2005, s. 2 (w.e.f. 12-10-2004).  
4. Ins. by Act 31 of 1999, s. 2 (w.e.f. 22-2-2000). 
5. Clause (aa) re-lettered as clause (ac) thereof by Act 1 of 2005, s. 2 (w.e.f. 12-10-2004). 
6. Ins. by Act 20 of 2015, s. 133 (w.e.f. 14-5-2015). 

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(ii) for differences, which derives its value from prices or indices of prices of such underlying goods or 
activities,  services,  rights,  interests  and  events,  as  may  be  notified  by  the  Central  Government,  in 
consultation  with  the  Board,  but  does  not  include  securities  as  referred  to  in  sub-clauses  (A)  and  (B)  of 
clause (ac);] 
(c) “member” means a member of a recognised stock exchange; 
1[(ca)  “non-transferable  specific  delivery  contract”  means  a  specific  delivery  contract,  the  rights  or 
liabilities  under  which  or  under  any  delivery  order,  railway  receipt,  bill  of  lading,  warehouse  receipt  or  any 
other documents of title relating thereto are not transferable;] 

(d)“option in securities” means a contract for the purchase or sale of a right to buy or sell, or a right to buy 
and sell, securities in future, and includes a teji, a mandi, a tejimandi, a galli, a put, a call or a put and call in 
securities; 

2[(da) “pooled investment  vehicle”  means a  fund established in India in the  form of a trust or otherwise, 
such as mutual fund, alternative investment fund, collective investment scheme or a business trust as defined in 
sub-section (13A) of section 2 of the Income-tax Act, 1961 (43 of 1961) and registered with the Securities and 
Exchange Board of India, or such other fund, which raises or collects monies from investors and invests such 
funds in accordance  with such regulations as  may be  made  by the Securities and Exchange Board of India in 
this behalf;] 

(e) “prescribed” means prescribed by rules made under this Act; 
1[(ea) “ready delivery contract” means a contract which provides for the delivery of goods and the payment 
of  a  price  therefor,  either  immediately,  or  within  such  period  not  exceeding  eleven  days  after  the  date  of  the 
contract and subject to such conditions as the Central Government may, by notification in the Official Gazette, 
specify in respect of any  goods, the period under such contract not being capable of extension by the  mutual 
consent of the parties thereto or otherwise: 

Provided that where any such contract is performed either wholly or in part; 
(I) by  realisation  of  any  sum  of  money  being  the  difference  between  the  contract  rate  and  the  settlement 

rate or clearing rate or the rate of any offsetting contract; or 

(II) by any other means whatsoever, and as a result of which the actual tendering of the goods covered by 
the contract or payment of the full price therefor is dispensed with, then such contract shall not be deemed to be 
a ready delivery contract;] 

(f)  “recognised  stock  exchange”  means  a  stock  exchange  which  is  for  the  time  being  recognised  by  the 

Central Government under section 4; 

(g)  “rules”,  with  reference  to  the  rules  relating  in  general  to  the  constitution  and  management  of  a  stock 
exchange, includes, in the case of a stock exchange which is an incorporated association, its memorandum and 
articles of association; 

3[(ga)  “scheme”  means  a  scheme  for  corporatisation  or  demutualisation  of  a  recognised  stock  exchange 

which may provide for— 

(i) the issue of shares for a lawful consideration and provision of trading rights in lieu of membership 

cards of members of a recognised stock exchange; 

(ii) the restrictions on voting rights; 
(iii)  the  transfer  of  property,  business,  assets,  rights,  liabilities,  recognitions,  contracts  of  the 
recognised stock exchange, legal proceedings by, or against, the recognised stock exchange, whether in the 
name of the recognised stock exchange or any trustee or otherwise and any permission given to, or by, the 
recognised stock exchange; 

(iv) the transfer of employees of a recognised stock exchange to another recognised stock exchange; 
(v)  any  other  matter  required  for  the  purpose  of,  or  in  connection  with,  the  corporatisation  or 

demutulisation, as the case may be, of the recognised stock exchange;] 
4[5[(gb)]  “Securities  Appellate  Tribunal”  means  a  Securities  Appellate  Tribunal  established  under  sub-

section (1) of section 15K of the Securities and Exchange Board of India Act, 1992 (15 of 1992);] 

(h) “securities” include— 

(i)  shares,  scrips  stocks,  bonds,  debentures,  debenture  stock  or  other  marketable  securities  of  a  like 

nature in or of any incorporated company or 6[or a pooled investment vehicle or other body corporate]; 

1. Ins. by Act 20 of 2015, s. 133 (w.e.f. 14-5-2015). 
2. Ins. by Act 13 of 2021, s. 148 (w.e.f. 1-4-2021). 
3. Ins. by Act 1 of 2005, s. 2 (w.e.f. 12-10-2004). 
4. Ins. by Act 32 of 1999, s. 2 (w.e.f. 16-12-1999). 
5. Clause (ga) re-lettered as clause (gb) thereof by s. 2, ibid. (w.e.f.12-10-2004). 
6. Subs. by Act 13 of 2021, s. 148, for “other body corporate” (w.e.f. 1-4-2021). 

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1[(ia) derivative; 

(ib) units or any other instrument issued by any collective investment scheme to the investors 

in such schemes;] 

2[(ic)  security  receipt  as  defined  in  clause  (zg)  of  section  2  of  the  Securitisation  and 
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of 2002);] 

3[(id)  units  or  any  other  such  instrument  issued  to  the  investors  under  any  mutual  fund 

scheme;] 

4[(ida) units or any other instrument issued by any pooled investment vehicle;] 

5[Explanation.—For  the  removal  of  doubts,  it  is  hereby  declared  that  "securities"  shall  not 
include  any  unit  linked  insurance  policy  or  scrips  or  any  such  instrument  or  unit,  by  whatever 
name called, which provides a combined benefit risk on the life of the persons and investment by 
such persons and issued by an insurer referred to in clause (9) of section 2 of the Insurance Act, 
1938(4 of 1938).] 

6[(ie) any  certificate  or instrument  (by  whatever name  called),  issued  to  an investor  by  any 
issuer  being  a  special  purpose  distinct  entity  which  possesses any  debt  or receivable,  including 
mortgage debt, assigned to such entity, and acknowledging beneficial interest of such investor in 
such debt or receiveable including mortgage debt, as the case may be;] 

(ii) Government securities; and 

(iii) rights or interests in securities; 

7[(ha) “specific delivery contract” means a commodity derivative which provides for the 
actual  delivery  of  specific  qualities  or  types  of  goods  during  a  specified  future  period  at  a 
price fixed thereby  or  to  be  fixed  in  the  manner  thereby  agreed and in  which  the  names  of 
both the buyer and the seller are mentioned;] 

8[(i) “spot delivery contract” means a contract which provides for,— 

(a) actual delivery of securities and the payment of a price therefor either on the same day as 
the date of the contract or on the next day, the actual period taken for the dispatch of the securities 
or the remittance of money therefor through the post being excluded from the computation of the 
period aforesaid if the parties to the contract do not reside in the same town or locality; 

(b) transfer of the securities by the depository from the account of a beneficial owner to the 

account of another beneficial owner when such securities are dealt with by a depository;] 

9[(j) “stock exchange” means— 

(a) any  body  of individuals,  whether  incorporated  or  not,  constituted  before  corporatisation 

and demutualisation under sections 4A and 4B, or 

(b) a body corporate incorporated under the Companies Act, 1956 whether under a scheme of 

corporatisation and demutualisation or otherwise, 

for the purpose of assisting, regulating or controlling the business of buying, selling or dealing in 
securities;] 

1. Ins. by Act 31 of 1999, s. 2 (w.e.f. 22-2-2000). 
2. Ins. by Act 54 of 2002, s. 41 and the Schedule (w.e.f. 21-6-2002). 
3. Ins. by Act 1 of 2005, s. 2 (w.e.f. 12-10-2005). 
4. Ins by Act 13 of 2021, s. 148 (w.e.f.1-4-2021). 
5. The Explanation ins. by Act 26 of 2010, s. 4 (w.e.f. 9-4-2010). 
6. Ins. by Act 27 of 2007, s. 2 (w.e.f. 28-5-2007). 
7. Ins. by Act 20 of 2015, s. 133 (w.e.f. 14-5-2015). 
8. Subs. by Act 22 of 1996, s. 30 and the Schedule, for clause (i) (w.e.f. 20-9-1995). 
9. Subs. by Act 1 of 2005, s. 2, for clause (j) (w.e.f. 12-10-2005). 

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1[(k)  “transferable  specific  delivery  contract”  means  a  specific  delivery  contract  which  is  not  a 
non-transferable  specific  delivery  contract  and  which  is  subject  to  such  conditions  relating  to  its 
transferability as the Central Government may by notification in the Official Gazette, specify in this 
behalf.] 

2[2A.  Interpretation  of  certain words  and  expressions.—Words  and expressions  used  herein  and 
not defined in this Act but defined in the Companies Act, 1956 (1 of 1956) or the Securities and Exchange 
Board of India Act, 1992 (15 of 1992) or the Depositories Act, 1996 (22 of 1996) shall have the same 
meanings respectively assigned to them in those Acts.] 

RECOGNISED STOCK EXCHANGE 

3. Application for recognition of stock exchanges.—(1) Any stock exchange, which is desirous of 
being recognised for the purposes of this Act, may make an application in the prescribed manner to the 
Central Government. 

(2) Every application under sub-section (1) shall contain such particulars as may be prescribed, and 
shall be accompanied by a copy of the bye-laws of the stock exchange for the regulation and control of 
contracts and also a copy of the rules relating in general to the constitution of the stock exchange, and in 
particular, to— 

(a) the governing body of such stock exchange, its constitution and powers of management and 

the manner in which the business is to be transacted; 

(b) the powers and duties of the office bearers of the stock exchange; 

(c)  the  admission  into  the  stock  exchange  of  various classes  of  members,  the  qualifications  for 
memberships,  and  the  exclusion,  suspension,  expulsion  and  re-admission  of  members  therefrom  or 
thereinto; 

(d) the procedure for the registration of partnerships as members of the stock exchange in cases 
where  the  rules  provide  for  such  membership;  and  the  nomination  and  appointment  of  authorised 
representatives and clerks. 

4.  Grant  of  recognition  to  stock  exchanges.—(1)  If  the  Central  Government  is  satisfied,  after 
making such inquiry as may be necessary in this behalf and after obtaining such to further information, if 
any, as it may require,— 

(a)  that  the  rules  and  bye-laws  of  a  stock  exchange  applying  for  registration  are  in  conformity 
with such conditions as may be prescribed with a view to ensure fair dealing and to protect investors; 

(b) that the stock exchange is willing to comply with any other conditions (including conditions 
as to the number of members) which the Central Government, after consultation with the governing 
body  of  the  stock  exchange  and  having  regard  to  the  area  served  by  the  stock  exchange  and  its 
standing and the nature of the securities dealt with by it, may impose for the purpose of carrying out 
the objects of this Act; and 

(c) that it would be in the interest of the trade and also in the public interest to grant recognition to 

the stock exchange; 

it may grant recognition to the stock exchange subject to the conditions imposed upon it as aforesaid and 
in such form as may be prescribed. 

(2) The conditions which the Central Government may prescribe under clause (a) of sub-section (1) 
for the grant of recognition to the stock exchanges may include, among other matters, conditions relating 
to,— 

(i) the qualifications for membership of stock exchanges; 

(ii) the manner in which contracts shall be entered into and enforced as between members; 

1. Ins. by Act 20 of 2015, s. 133 (w.e.f. 14-5-2015). 
2. Ins. by Act 32 of 1999, s. 3 (w.e.f. 16-12-1999). 

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(iii) the representation of the Central Government on each of the stock exchanges by such number 

of persons not exceeding three as the Central Government may nominate in this behalf; and 

(iv) the maintenance of accounts of members and their audit by Chartered accountants wherever 

such audit is required by the Central Government. 

(3) Every grant of recognition to a stock exchange under this section shall be published in the Gazette 
of India and also in the Official Gazette of the State in which the principal office of the stock exchange is 
situate, and such recognition shall have effect as from the date of its publication in the Gazette of India. 

(4) No application for the grant of recognition shall be refused except after giving an  opportunity to 
the  stock  exchange  concerned  to  be  heard  in  the  matter;  and  the  reasons  for  such  refusal  shall  be 
communicated to the stock exchange in writing. 

(5) No rules of a recognised stock exchange relating to any of the matters specified in sub-section (2) 

of section 3 shall be amended except with the approval of the Central Government. 

1[4A. Corporatisation and demutualisation of stock exchanges.—On and from the appointed date, 
all recognised stock exchanges (if not corporatised and demutualised before the appointed date) shall be 
corporatised and demutualised in accordance with the provisions contained in section 4B: 

Provided that the Securities and Exchange Board of India may, if it is satisfied that any recognised 
stock exchange was prevented by sufficient cause from being corporatised and demutualised on or after 
the appointed date, specify another appointed date in respect of that recognised stock exchange and such 
recognised stock exchange may continue as such before such appointed date. 

Explanation.—For the purposes of this section, “appointed date” means the date which the Securities 
and Exchange Board of India may, by notification in the Official Gazette, appoint and different appointed 
dates may be appointed for different recognised stock exchanges.] 

4B.  Procedure  for  corporatisation  and  demutualisation.—(1)  All  recognised  stock  exchanges 
referred  to  in  section  4A  shall,  within  such  time  as  may  be  specified  by  the  Securities  and  Exchange 
Board of India, submit a scheme for corporatisation and demutulisation for its approval: 

Provided  that  the  Securities  and  Exchange  Board  of  India,  may,  by  notification  in  the  Official 
Gazette,  specify  name  of  the  recognised  stock  exchange,  which  had  already  been  corporatised  and 
demutualised, and such stock exchange shall not be required to submit the scheme under this section. 

(2)  On  receipt  of  the  scheme  referred  to  in  sub-section  (1),  the  Securities  and  Exchange  Board  of 
India  may,  after  making  such  enquiry  as  may  be  necessary  in  this  behalf  and  obtaining  such  further 
information, if any, as it may require and if it is satisfied that it would be in the interest of the trade and 
also in the public interest, approve the scheme with or without modification. 

(3) No scheme under sub-section (2) shall be approved by the Securities and Exchange Board of India 
if the issue of shares for a lawful consideration or provision of trading rights in lieu of membership card 
of the members of a recognised stock exchange or payment of dividends to members have been proposed 
out of any reserves or assets of that stock exchange. 

(4) Where the scheme is approved under sub-section (2), the scheme so approved shall be published 

immediately by— 

(a) the Securities and Exchange Board of India in the Official Gazette; 

(b) the recognised stock exchange in such two daily newspapers circulating in India, as may be 

specified by the Securities and Exchange Board of India, 

and  upon  such  publication,  notwithstanding  anything  to  the  contrary  contained  in  this  Act  or  any  other 
law for the time being in force or any agreement, award, judgment, decree or other instrument for the time 
being  in  force, the  scheme  shall  have effect  and  be  binding  on  all  persons and authorities  including  all 
members, creditors, depositors and employees of the recognised stock exchange and on all persons having 

1. Ins. by Act 1 of 2005, s. 3 (w.e.f. 12-10-2004). 

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any  contract,  right,  power,  obligation  or  liability  with,  against,  over,  to,  or  in  connection  with,  the 
recognised stock exchange or its members. 

(5) Where the Securities and Exchange Board of India is satisfied that it would not be in the interest 
of  the  trade  and  also  in  the  public  interest  to  approve  the  scheme  under  sub-section  (2),  it  may,  by  an 
order, reject the scheme and such order of rejection shall be published by it in the Official Gazette: 

Provided that the Securities and Exchange Board of India shall give a reasonable opportunity of being 
heard to all the persons concerned and the recognised stock exchange concerned before passing an order 
rejecting the scheme. 

(6) The Securities and Exchange Board of India may, while approving the scheme under sub-section 

(2), by an order in writing, restrict— 

(a)  the  voting  rights  of  the  shareholders  who  are  also  stock  brokers  of  the  recognised  stock 

exchange; 

(b)  the  right  of  shareholders  or  a  stock  broker  of  the  recognised  stock  exchange  to  appoint  the 

representatives on the governing board of the stock exchange; 

(c) the maximum number of representatives of the stock brokers of the recognised stock exchange 
to be appointed on the governing board of the recognised stock exchange, which shall not exceed one-
fourth of the total strength of the governing board. 

(7)  The  order  made  under  sub-section  (6)  shall  be  published  in  the  Official  Gazette  and  on  the 
publication thereof, the order shall, notwithstanding anything to the contrary contained in the Companies 
Act, 1956 (1 of 1956), or any other law for the time being in force, have full effect. 

(8)  Every  recognised  stock  exchange,  in  respect  of  which  the  scheme  for  corporatisation  or 
demutualisation has been approved under sub-section (2), shall, either by fresh issue of equity shares to 
the  public  or  in  any  other  manner  as  may  be  specified  by  the  regulations  made  by  the  Securities  and 
Exchange Board of India, ensure that at least fifty-one per cent. of its equity share capital is held, within 
twelve months from the date of publication of the order under sub-section (7), by the public other than 
shareholders having trading rights: 

Provided that the Securities and Exchange Board of India may, on sufficient cause being shown to it 

and in the public interest, extend the said period by another twelve months.] 

5. Withdrawal of recognition.—1[(1)] If the Central Government is of opinion that the recognition 
granted to a stock exchange under the provisions of this Act should, in the interest of the trade or in the 
public  interest,  be  withdrawn,  the  Central  Government  may  serve  on  the  governing  body  of  the  stock 
exchange a written notice that the Central Government is considering the withdrawal of the recognition 
for the reasons stated in the notice, and after giving an opportunity to the governing body to be heard in 
the matter, the Central Government may withdraw, by notification in the Official Gazette, the recognition 
granted to the stock exchange; 

Provided that no such withdrawal shall affect the validity of any contract entered into or made before 
the date of the notification, and the Central Government may, after consultation with the stock exchange, 
make  such  provision  as  it  deems  fit  in  the  notification  of  withdrawal  or  in  any  subsequent  notification 
similarly published for the due performance of any contracts outstanding on that date. 

2[(2)  Where  the  recognised  stock  exchange  has  not  been  corporatised  or  demutualised  or  it  fails  to 
submit the scheme referred to in sub-section (1) of  section 4B within the specified time therefor or the 
scheme has been rejected by the Securities and Exchange Board of India under sub-section (5) of section 
4B, the recognition granted to such stock exchange under section 4, shall, notwithstanding anything to the 
contrary contained in this Act, stand withdrawn and the Central Government shall publish, by notification 
in the Official Gazette, such withdrawal of recognition: 

1. Section 5 numbered as sub-section (1) thereof by Act 1 of 2005, s. 4 (w.e.f. 12-10-2004). 
2. Ins. by s. 4, ibid. (w.e.f. 12-10-2004). 

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Provided that no such withdrawal shall affect the validity of any contract entered into or made before 
the date of the notification, and the Securities and Exchange Board of India may, after consultation with 
the stock exchange, make such provisions as it deems fit in the order rejecting the scheme published in 
the Official Gazette under sub-section (5) of section 4B.] 

6. Power of Central Government to call for periodical returns or direct inquiries to be made.—
(1) Every recognised stock exchange shall furnish to the  1[Securities and Exchange Board of India] such 
periodical returns relating to its affairs as may be prescribed. 

(2) Every recognised stock exchange and every member thereof shall maintain and preserve for such 
periods not exceeding five years such books of account, and other documents as the Central Government, 
after consultation with the stock exchange concerned, may prescribe in the interest of the trade or in the 
public  interest,  and  such  books  of  account,  and  other  documents  shall  be  subject  to  inspection  at  all 
reasonable times 2[by the Securities and Exchange Board of India]. 

(3)  Without  prejudice  to  the  provisions  contained  in  sub-sections  (1)  and  (2),  the  1[Securities  and 
Exchange Board of India], if it is satisfied that it is in the interest of the trade or in the public interest so to 
do, may order in writing,— 

(a)  call  upon  a  recognised  stock  exchange  or  any  member  thereof  to  furnish  in  writing  such 
information or explanation relating to the affairs of the stock exchange or of the member in relation to 
the stock exchange as the 1[Securities and Exchange Board of India] may require; or 

(b) appoint one or more persons to make an inquiry in the prescribed manner in relation to the 
affairs of the governing body of a stock exchange or the affairs of any of the members of the stock 
exchange  in  relation  to  the  stock  exchange  and  submit  a  report  of  the  result  if  such  inquiry  to  the 
1[Securities and Exchange Board of India] within such time as may be specified in the order or, in the 
case  of  an  inquiry  in  relation  to  the  affairs  of  any  of  the  members  of  a  stock  exchange,  direct  the 
governing body to make the inquiry and submit its report to the Central Government 

(4) Where an inquiry in relation to the affairs of a recognised stock exchange or the affairs of any of 

its members in relation to the stock exchange has been undertaken under sub-section (3),— 

(a) every director, manager, secretary or other officer of such stock exchange; 

(b) every member of such stock exchange; 

(c)  if  the  member  of  the  stock  exchange  is  a  firm,  every  partner,  manager,  secretary  or  other 

officer of the firm; and 

(d) every other person or body of persons who has had dealing in the course of business with any 

of the persons mentioned in clauses (a), (b) and (c), whether directly or indirectly; 

shall be bound to produce before the authority making the inquiry all such books of  account, and other 
documents in his custody or power relating to or having a bearing on the subject-matter of such inquiry 
and  also  to  furnish  the  authorities  within  such  time  as  may  be  specified  with  any  such  statement  or 
information relating thereto as may be required of him. 

7.  Annual  reports  to  be  furnished  to  the  Central  Government  by  stock  exchanges.—Every 
recognised  stock  exchange  shall  furnish  the  Central  Government  with  a  copy  of  the  annual  report,  and 
such annual report shall contain such particulars as may be prescribed. 

3[7A.  Power  of  recognised  stock  exchange  to  make  rules  restricting  voting  rights,  etc.—(1)  A 
recognised stock exchange may make rules or amend any rules made by it to provide for all or any of the 
following matters, namely— 

(a)  the  restriction  of  voting  rights  to  members  only  in  respect  of  any  matter  placed  before  the 

stock exchange at any meeting; 

1. Subs. by Act 15 of 1992, s. 33 and the Schedule, for “Central Government” (w.e.f. 30-1-1992). 
2. Subs. by s. 33 and the Schedule, ibid., for “by the Central Government” (w.e.f. 30-1-1992). 
3. Ins. by Act 49 of 1959, s. 2 (w.e.f. 8-12-1959). 

10 

 
                                                           
(b) the regulation of voting rights in respect of any matter placed before the stock exchange at any 
meeting so that such member may be entitled to have one vote only, irrespective of his share of the 
paid-up equity capital of the stock exchange; 

(c) the restriction on the right of a member to appoint another person as his proxy to attend and 

vote at a meeting of the stock exchange; 

(d) such incidental consequential and supplementary matters as may be necessary to give effect to 

any of the matters specified in clauses (a),(b) and (c). 

(2) No rules of a recognised stock exchange made or amended in relation to any matter referred to in 
clauses  (a)  to  (d)of  sub-section  (1)  shall  have  effect  until  they  have  been  approved  by  the  Central 
Government  and  published  by  that  Government  in  the  Official  Gazette  and,  in  approving  the  rules  so 
made or amended, the Central Government may make such modifications therein as it thinks fit, and on 
such publication, the rules as approved by the Central Government shall be deemed to have been validly 
made, notwithstanding anything to the contrary contained in the Companies Act, 1956 (1 of 1956).] 

8. Power of Central Government to direct rules to be made or to make rules.—(1) Where, after 
consultation with the governing bodies of stock exchanges generally or with the governing body of any 
stock exchange in particular, the Central Government is of opinion that it is necessary or expedient so to 
do, it may, by order in writing together with a statement of the reasons therefor, direct recognised stock 
exchanges generally or any recognised stock exchange in particular, as the case may be, to make any rules 
or to amend any rules already made in respect of all or any of the matters specified in sub-section (2) of 
section 3 within a period of1[two months] from the date of the order. 

(2)  If  any  recognised  stock  exchange  fails  or  neglects  to  comply  with  any  order  made  under                  

sub-section  (1)  within the period  specified therein,  the  Central  Government  may  make  the  rules  for,  or 
amend the rules made by, the recognised stock exchange, either in the form proposed in the order or with 
such modifications thereof as may be agreed to between the stock exchange and the Central Government. 

(3) Where in pursuance of this section any rules have been made or amended, the rules so made or 
amended  shall  be  published  in  the  Gazette  of  India  and  also  in  the  Official  Gazette  or  Gazettes  of  the 
State or States in which the principal office or offices of the recognised stock exchange or exchanges is or 
are situate, and, on the publication thereof in the Gazette of India, the rules so made or amended shall, 
notwithstanding  anything  to  the  contrary  contained  in  the  Companies  Act,  1956  (1  of  1956),  or  in  any 
other law for the time being in force, have effect, as if they had been made or amended by the recognised 
stock exchange or stock exchanges, as the case may be. 

2[8A. Clearing corporation.—(1) A recognised stock exchange may, with the prior approval of the 
Securities and Exchange Board of India, transfer the duties and functions of a clearing house to a clearing 
corporation, being a company incorporated under the Companies Act, 1956 (1 of 1956), for the purpose 
of— 

(a) the periodical settlement of contracts and differences thereunder; 

(b) the delivery of, and payment for, securities; 

(c) any other matter incidental to, or connected with, such transfer. 

(2)  Every  clearing  corporation  shall,  for  the  purpose  of  transfer  of  the  duties  and  functions  of  a 
clearing house to a clearing corporation referred to in sub-section (1), make bye-laws and submit the same 
to the Securities and Exchange Board of India for its approval. 

(3) The Securities and Exchange Board of India may, on being satisfied that it is in the interest of the 
trade and also in the public interest to transfer the duties and functions of a clearing house to a clearing 
corporation, grant approval to the bye-laws submitted to it under sub-section (2) and approve the transfer 
of the duties and functions of a clearing house to a clearing corporation referred to in sub-section (1). 

1. Subs. by Act 9 of 1995, s. 19, for “six months” (w.e.f. 25-1-1995). 
2. Ins. by Act 1 of 2005, s. 5 (w.e.f. 12-10-2004). 

11 

 
                                                           
(4) The provisions of sections 4, 5, 6, 7, 8, 9, 10, 11 and 12 shall, as far as may be, apply to a clearing 

corporation referred to in sub-section (1) as they apply in relation to a recognised stock exchange.] 

9. Power  of  recognised  stock  exchanges to make  bye-laws.—(1)  Any  recognised stock  exchange 
may, subject to the previous approval of the  1[Securities and Exchange Board of India], make bye-laws 
for the regulation and control of contracts. 

(2) In particular, and without prejudice to the generality of the foregoing power, such bye-laws may 

provide for— 

(a) the opening and closing of markets and the regulation of the hours of trade; 

(b)  a  clearing  house  for  the  periodical  settlement  of  contracts  and  differences  here  under,  the 
delivery  of  and  payment  for  securities,  the  passing  on  of  delivery  orders  and  the  regulation  and 
maintenance of such clearing house; 

(c) the submission to the 1[Securities and Exchange Board of India] by the clearing house as soon 
as may be after each periodical settlement of all or any of the following particulars as the  1[Securities 
and Exchange Board of India] may, from time to time, require, namely:— 

(i) the total number of each category of security carried over from one settlement period to 

another; 

(ii)  the  total  number  of  each  category  of  security,  contracts  in  respect  of  which  have  been 

squared up during the course of each settlement period; 

(iii) the total number of each category of security actually delivered at each clearing; 

(d)  the  publication  by  the  clearing  house  of  all  or  any  of  the  particulars  submitted  to  the 
1[Securities and Exchange Board of India] under clause (c) subject to the directions, if any, issued by 
the 1[Securities and Exchange Board of India] in this behalf; 

(e) the regulation or prohibition of blank transfers; 

(f)  the  number  and  classes  of  contracts  in  respect  of  which  settlements  shall  be  made  or 

differences paid through the clearing house; 

(g) the regulation, or prohibition of budlas or carry-over facilities; 

(h) the fixing, altering or postponing of days for settlements; 

(i) the determination and declaration of market rates, including the opening, closing, highest and 

lowest rates for securities; 

(j)  the  terms,  conditions  and  incidents  of  contracts,  including  the  prescription  of  margin 

requirements, if any, and conditions relating thereto, and the forms of contracts in writing; 

(k)  the  regulation  of  the  entering  into,  making,  performance,  rescission  and  termination,  of 
contracts, including contracts between members or between a member and his constituent or between 
a member and a person who is not a member, and the consequences of default or insolvency on the 
part  of  a  seller  or  buyer  or  intermediary,  the  consequences  of  a  breach  or  omission  by  a  seller  or 
buyer, and the responsibility of members who are not parties to such contracts; 

(l) the regulation of taravanibusiness including the placing of limitations thereon; 

(m) the listing of securities on the stock exchange, the inclusion of any security for the purpose of 
dealings and the suspension or withdrawal of any such securities, and the suspension or prohibition of 
trading in any specified securities; 

(n)  the  method  and  procedure  for  the  settlement  of  claims  or  disputes,  including  settlement  by 

arbitration; 

(o) the levy and recovery of fees, fines and penalties; 

1. Subs. by Act 15 of 1992, s. 33 and the Schedule, for “Central Government” (w.e.f. 30-1-1992). 

12 

 
                                                           
(p) the regulation of the course of business between parties to contracts in any capacity; 

(q) the fixing of a scale of brokerage and other chargers; 

(r) the making, comparing, settling and closing of bargains; 

(s) the emergencies in trade which may arise, whether as a result of pool or syndicated operations 
or cornering or otherwise, and the exercise of powers in such emergencies, including the power to fix 
maximum and minimum prices for securities; 

(t) the regulation of dealings by members for their own account; 

(u) the separation of the functions of the jobbers and brokers; 

(v)  the  limitations  on  the  volume  of  trade  done  by  any  individual  member  in  exceptional 

circumstances; 

(w)  the  obligation  of  members  to  supply  such  information  or  explanation  and  to  produce  such 

documents relating to the business as the governing body may require. 

(3) The bye-laws made under this section may— 

(a) specify the bye-laws the contravention of which shall make a contract entered into otherwise 

than in accordance with the bye-laws void under sub-section (1) of section14; 

(b)  provide  that  the  contravention  of  any  of  the  bye-laws  shall  render  the  member  concerned 

liable to one or more of the following punishments, namely:— 

(i) fine; 

(ii) expulsion from membership; 

(iii) suspension from membership for a specified period; 

(iv) any other penalty of a like nature not involving the payment of money. 

(4)  Any  bye-laws  made  under this section  shall  be  subject to such  conditions in  regard  to  previous 
publication as may be prescribed, and when approved by the  1[Securities and Exchange Board of India], 
shall  be  published  in  the  Gazette  of  India  and  also  in  the  Official  Gazette  of  the  State  in  which  the 
principal office of the recognised stock exchange is situate, and shall have effect as from the date of its 
publication in the Gazette of India; 

Provided  that  if  the  1[Securities  and  Exchange  Board  of  India]  is  satisfied  in  any  case  that  in  the 
interest of the trade or in the public interest any bye-law should be made immediately, it may, by order in 
writing specifying the reasons therefore, dispense with the condition of previous publication. 

10.  Power  of  1[Securities  and  Exchange  Board  of  India]  to  make  or  amend  byelaws  of 
recognised  stockexchanges.—(1)  The  1[Securities  and  Exchange  Board  of  India]  may,  either  on  a 
request in writing received by it in this behalf from the governing body of a recognised stock exchange or 
on its own motion, if it is satisfied after consultation with the governing body of the stock exchange that it 
is necessary or expedient so to do and after recording its reasons for so doing, make bye-laws for all or 
any of the matters specified in section 9 or amend any bye-laws made by such stock exchange under that 
section. 

(2) Where in  pursuance  of  this  section any  bye-laws  have  been  made  or  amended,  the  due-laws  so 
made or amended shall be published in the Gazette of India and also in the Official Gazette of the State in 
which the principal office of the recognised stock exchange is situate, and on the publication thereof in 
the  Gazette  of  India,  the  bye-laws  so  made  or  amended  shall  have  effect  as  if  they  had  been  made  or 
amended by the recognised stock exchange concerned. 

(3)  Notwithstanding  anything  contained  in  this  section,  where  the  governing  body  of  a  recognised 
stock  exchange  objects  to  any  bye-laws  made  or  amended  under  this  section  by  the  1[Securities  and 

1. Subs. by Act 15 of 1992, s. 33 and the Schedule, for “Central Government” (w.e.f. 30-1-1992). 

13 

 
                                                           
Exchange Board of India] on its own motion, it may, within  1[two months] of the publication thereof in 
the  Gazette  of  India  under  sub-section  (2)  ,  apply  to the  2[Securities  and  Exchange  Board  of  India]  for 
revision thereof, and the  2[Securities and Exchange Board of India] may, after giving an opportunity to 
the  governing  body  of  the  stock  exchange  to  be  heard  in  the  matter,  revise  the  bye-laws  so  made  or 
amended, and where any bye-laws so made or amended are revised as a result of any action taken under 
this sub-section, the bye-laws so revised shall be published and shall become effective as provided in sub-
section (2). 

(4) The making or the amendment or revision of any bye-laws under this section shall in all cases be 

subject to the condition of previous publication: 

Provided  that  if  the  2[Securities  and  Exchange  Board  of  India]  is  satisfied  in  any  case  that  in  the 
interest  of  the  trade  or  in  the  public  interest  any  bye-laws  should  be  made,  amended  or  revised 
immediately, it may, by order in writing  specifying the reasons therefor, dispense with the condition of 
previous publication. 

11.  Power  of  Central  Government  to  supersede  governing  body  of  a  recognised  stock 
exchange.—(1) Without prejudice to any other powers vested in the Central Government under this Act, 
where the Central Government is of opinion that the governing body of any recognised stock exchange 
should  be  superseded,  then,  notwithstanding  anything  contained  in  any  other  law  for  the  time  being  in 
force,  the  Central  Government  may  serve  on  the  governing  body  a  written  notice  that  the  Central 
Government is considering the supersession of the governing body for the reasons specified in the notice 
and after giving an opportunity to the governing body to be heard in the matter it may, by notification in 
the  Official  Gazette,  declare  the  governing  body  of  such  stock  exchange  to  be  superseded,  and  may 
appoint any person or persons to exercise and perform all the powers and duties of the governing body, 
and, where more persons than one are appointed, may appoint one of such persons to be the chairman and 
another to be the Vice-Chairman thereof. 

(2)  On the  publication  of a  notification  in  the  Official  Gazette  under sub-section  (1),  the  following 

consequences shall ensue, namely:— 

(a) the members of the governing body which has been superseded shall, as from the date of the 

notification of supersession, cease to hold office as such members; 

(b)the person or persons appointed under sub-section (1)may exercise and perform all the powers 

and duties of the governing body which has been superseded; 

(c) all such property of the recognised stock exchange as the person or persons appointed under 
sub-section(1) may, by order in writing, specify in this behalf as being necessary for the purpose of 
enabling  him  or  them  to  carry  on  the  business  of  the  stock  exchange,  shall  vest  in  such  person  or 
persons. 

(3)  Notwithstanding  anything  to  the  contrary  contained  in  any  law  or  the  rules  or  bye-laws  of  the 
recognised stock exchange the governing body of which is superseded under sub-section (1), the person 
or persons appointed under that sub-section shall hold office for such period as may be specified in the 
notification published under that sub-section, and the Central Government may from time to time, by like 
notification, vary such period. 

(4) The Central Government may at any time before the determination of the period of office of any 
person or persons appointed under this section call upon  the recognised stock exchange to re-constitute 
the governing body in accordance with its rules and on such re-constitution all the property of the stock 
exchange which has vested in, or was in the possession of, the person or persons appointed under sub-
section(1) shall re-vest or vest, as the case may be, in the governing body so re-constituted: 

Provided that until a governing body is so re-constituted, the person or persons appointed undersub-

section(1), shall continue to exercise and perform their powers and duties. 

1. Subs. by Act 9 of 1995, s. 20, for “six months” (w,e,f, 25-1-1995). 
2. Subs. by Act 15 of 1992, s. 33 and the Schedule, for “Central Government” (w.e.f. 30-1-1992). 

14 

 
                                                           
12.  Power  to  suspend  business  of  recognised  stock  exchanges.—If  in  the  opinion  of  the  Central 
Government  an  emergency  has  risen  and  for  the  purpose  of  meeting  the  emergency  the  Central 
Government considers it expedient so to do, it may, by notification in the Official Gazette, for reasons to 
be set out therein, direct a recognised stock exchange to suspend such of its business for such period not 
exceeding seven days and subject to such conditions as may be specified in the notification, and, if, in the 
opinion of the Central Government, the interest of the trade or the public interest requires that the period 
should be extended, may, by like notification extend the said period from time to time: 

Provided that where the period of suspension is to be extended beyond the first period, no notification 
extending  the  period  of  suspension  shall  be  issued  unless  the  governing  body  of  the  1[recognised 
association stock exchange] has been given an opportunity of being heard in the matter. 

2[12A.  Power  to  issue  directions.—3[1]  If,  after  making  or  causing  to  be  made  an  inquiry,  the 

Securities and Exchange Board of India is satisfied it is necessary— 

(a) in the interest of investors, or orderly development of securities market; 
(b) to prevent the affairs of any recognised stock exchange or clearing corporation, or such other 
agency  or  person,  providing  trading  or  clearing  or  settlement  facility  in  respect  of  securities,  being 
conducted in a manner detrimental to the interests of investors or securities market; or 

(c)  to  secure  the  proper  management  of  any  such  stock  exchange  or  clearing  corporation  or 

agency or person, referred to in clause (b), 
it may issue such directions, — 

(i) to any stock exchange or clearing corporation or agency or person referred to in clause (b) 

or any person or class of persons associated with the securities market; or 

(ii) to any company whose securities are listed or proposed to be listed in a recognised stock 

exchange, 

as may be appropriate in the interests of investors in securities and the securities market.] 
4[Explanation.—For the removal of doubts, it is hereby declared that power to issue directions under 
this  section  shall include  and  always  be  deemed to  have  been  included  the  power to direct any  person, 
who  made  profit  or  averted  loss  by  indulging  in  any  transaction  or  activity  in  contravention  of  the 
provisions of this Act or regulations made thereunder, to disgorge an amount equivalent to the wrongful 
gain made or loss averted by such contravention.] 

5[(2)  Without  prejudice  to  the  provisions  of  sub-section  (1)  and  section  23-I,  the  Securities  and 
Exchange  Board  of  India  may,  by  an  order,  for  reasons  to  be  recorded  in  writing,  levy  penalty  under 
section  23A,  23B,  23D,  23E,  23F,  23G,  23GA  and  23H  after  holding  an  inquiry  in  the  prescribed 
manner.] 

CONTRACTS AND OPTIONS IN SECURITIES 

13.  Contracts  in  notified  areas  illegal  in  certain  circumstances.—If  the  Central  Government  is 
satisfied, having regard to the nature or the volume of transactions in securities in any6[State or States or 
area],  that  is  necessary  so  to  do,  it  may,  by  notification  in  the  Official  Gazette,  declare  this  section  to 
apply  to  such4[State  or  States  or  area],  and  thereupon  every  contract  in  such4[State  or  States  or  area] 
which is entered into after the date of the notification otherwise than7[between members of a recognised 
stock exchange or recognised stock exchanges] in such4[State or States or area] or through or with such 
member shall be illegal. 

8[Provided  that  any  contract  entered  into  between  members  of  two  or  more  recognised  stock 

exchanges in such State or States or area, shall— 

(i) be subject to such terms and conditions as may be stipulated by the respective stock exchanges 

with prior approval of Securities and Exchange Board of India; 

1. Subs. by Act 56 of 1974, s. 2 and the First Schedule (w.e.f. 20-12-1974). 
2. Ins. by Act 1 of 2005, s. 6 (w.e.f 12-10-2004). 
3. Section 12A numbered as thereof by sub-section (1) by Act 13 of 2018, s. 147 (w.e.f. 8-3-2019). 
4. Ins. by Act 27 of 2014, s. 24 (w.e.f. 8-9-2014). 
5. Ins. by Act 13 of 2018, s. 147 (w.e.f. 8-3-2019). 
6. Subs. by Act 1 of 2005, s. 7, for “State or area” (w.e.f. 12-10-2004). 
7. Subs. by s. 7, ibid., for “between members of a recognised stock exchange” (w.e.f. 12-10-2004). 
8. The proviso ins. by s. 7, ibid. (w.e.f. 12-10-2004). 

15 

 
                                                           
(ii)  require  prior  permission  from  the  respective  stock  exchanges  if  so  stipulated  by  the  stock 

exchanges with prior approval of the Securities and Exchange Board of India.] 

1[13A. Additional trading floor.—A stock exchange may establish additional trading floor with the 
prior approval of the Securities and Exchange Board of India in accordance with the terms and conditions 
stipulated by the said Board. 

Explanation.—For  the  purposes  of  this  section,  “additional  trading  floor”  means  a  trading  ring  or 
trading facility offered by a recognised stock exchange outside its area of operation to enable the investors 
to  buy  and  sell  securities  through  such  trading  floor  under  the  regulatory  framework  of  that  stock 
exchange.] 

 14.  Contracts  in  notified  areas  to  be  void  in  certain  circumstances.—(1)  Any  contract  entered 
into any State or area specified in the notification under section 13 which is in contravention of any of the 
bye-laws specified in that behalf under clause (a) of sub-section (3) of section 9 shall be void— 

(i) as respects the rights of any member of the recognised stock exchange who has entered into 

such contract in contravention of any such bye-law, and also 

(ii) as respects the rights of any other person who has knowingly participated in the transaction 

entailing such contravention. 

(2) Nothing in sub-section (1) shall be construed to affect the right of any person other than a member 
of  the  stock  exchange  to  enforce  any  such  contract  or  to  recover  any  sum  under  or  in  respect  of  such 
contract if such person had no knowledge that the transaction was in contravention of any of the bye-laws 
specified in clause (a) of sub-section (3) of section 9. 

15.  Members  may  not  act  as  principals in  certain circumstances.—No  member  of a  recognised 
stock  exchange  shall  in  respect  of  any  securities  enter  into  any  contract  as  a  principal  with  any  person 
other than a member of a recognised stock exchange, unless he has secured the consent or authority of 
such person and discloses in the note, memorandum or agreement of sale or purchase that he is acting as a 
principal; 

Provided that where the member has secured the consent or authority of such person otherwise than in 
writing  he  shall  secure  written  confirmation  by  such  persons  of  such  consent  or  authority  within  three 
days from the date of the contract: 

Provided  further  that  no  such  written  consent  or  authority  of  such  person  shall  be  necessary  for 
closing out any outstanding contract entered into by such person in accordance with the bye-laws, if the 
member discloses in the note, memorandum or agreement of sale or purchase in respect of such closing 
that he is acting as a principal. 

16. Power to prohibit contracts in certain cases.—(1) If the Central Government is of opinion that 
it is necessary to prevent undesirable speculation in specified securities in any State or area, it may, by 
notification in the Official Gazette, declare that no person in the State or area specified in the notification 
shall, save with the permission of the Central Government, enter into any contract for the sale or purchase 
of  any  security  specified  in  the  notification  except  to  the  extent  and  in  the  manner,  if  any,  specified 
therein. 

(2) All contracts in contravention of the provisions of sub-section (1) entered into after the date of the 

notification issued thereunder shall be illegal. 

17. Licensing of dealers in securities in certain areas.—(1) Subject to the provisions of sub-section 
(3)  and  to  the  other  provisions  contained  in  this  Act,  no  person  shall  carry  on  or  purport  to  carry  on, 
whether on his own behalf of any other person, the business if dealing securities in any State or area to 
which  section  13  has  not  been  declared  to  apply  and  to  which  the  Central  Government  may,  by 
notification in the Official Gazette, declare this section to apply, except under the authority of a 2[licence 
granted by the Securities and Exchange Board of India] in this behalf. 

1. Ins. by Act 9 of 1995, s. 21 (w.e.f. 25-1-1995). 
2. Subs. by Act 15 of 1992, s. 33 and the Schedule, for “licence granted by the Central Government” (w.e.f 30-1-1992). 

16 

 
                                                           
(2) No notification under sub-section (1) shall be issued with respect to any State or area unless the 
Central Government is satisfied, having regard to the manner in which securities are being dealt with in 
such State or area, that it is desirable or expedient in the interest of the trade or in the public interest that 
such dealings should be regulated by a system of licensing. 

(3) The restrictions imposed by sub-section (1) in relation to dealings in securities shall not apply to 

the doing of anything by or on behalf of a member of any recognised stock exchange. 

1[17A. Public issue and listing of securities referred to in sub-clause (ie) of clause (h) of section 
2.—(1) Without prejudice to the provisions contained in this Act or any other law for the time being in 
force, no securities of the nature referred to in sub-clause (ie) of clause (h) of section 2 shall be offered to 
the public or listed on any recognised stock exchange unless the issuer fulfils such eligibility criteria and 
complies  with  such  other  requirements  as  may  be  specified  by  regulations  made  by  the  Securities  and 
Exchange Board of India. 

(2)  Every  issuer  referred  to  in  sub-clause  (ie)  of  clause  (h)  of  section  2  intending  to  offer  the 
certificates or instruments referred therein to the public shall make an application, before issuing the offer 
document to the public, to one or more recognised stock exchanges for permission for such certificates or 
instruments to be listed on the stock exchange or each such stock exchange. 

(3) Where the permission applied for under sub-section (2) for listing has not been granted or refused 
by  the  recognised  stock  exchanges  or  any  of  them,  the  issuer  shall  forthwith  repay  all  moneys,  if  any, 
received from applicants in pursuance of the offer document, and if any such money is not repaid within 
eight days after the issuer becomes liable to repay it, the issuer and every director or trustee thereof, as the 
case may be, who is in default shall, on and from the expiry of the eighth day, be jointly and severally 
liable to repay that money with interest at the rate of fifteen per cent. per annum. 

Explanation.—In reckoning the eighth day after another  day, any intervening day which is a public 
holiday under the Negotiable Instruments Act, 1881(26 of 1881), shall be disregarded, and if the eighth 
day (as so reckoned) is itself such a public holiday, there shall for the said purposes be substituted the first 
day thereafter which is not a holiday. 

(4) All the provisions of this Act relating to listing of securities of a public company on a recognised 
stock exchange shall,  mutatis mutandis, apply to the listing of the securities of the nature referred to in 
sub-clause (ie) of clause (h) of section 2 by the issuer, being a special purpose distinct entity. 

18. Exclusion of spot delivery contracts from sections 13, 14, 15 and 17.—(1) Nothing contained 

in sections 13, 14,15 and 17 shall apply to spot delivery contracts. 

(2)  Notwithstanding  anything  contained  in  sub-section  (1), if  the  Central  Government  is  of  opinion 
that in the interest of the trade or in the public interest it is expedient to regulate and control the business 
of delaying in spot delivery contracts also in any State or area (whether section 13 has been declared to 
apply to the State or area or not), it may, by notification in the Official Gazette, declare that the provisions 
of section  17  shall also apply  to  such  State or  area  in  respect  of  spot  delivery contracts  generally  or in 
respect  of spot  delivery  contracts  for the sale  or  purchase  of  such  securities  as may  be  specified in the 
notification,  and  may  also specify  the  manner  in  which,  and the  extent to  which,  the  provisions  of  that 
section shall so apply. 

2[18A. Contracts in derivatives.—Notwithstanding anything contained in any other law for the lime 

being in force, contracts in derivative shall be legal and valid if such contracts are— 

(a) traded on a recognised stock exchange; 

(b) settled  on the clearing house of the recognised 3[stock exchange; or] in accordance with the 

rules and bye-laws of such stock exchange.] 

1. Ins. by Act 27 of 2007, s. 3 (w.e.f. 28-5-2007). 
2. Ins. by Act 31 of 1999, s. 3 (w.e.f. 22-2-2000). 
3. Subs. by Act 20 of 2015, s. 134, for “stock exchange” (w.e.f. 14-5-2015). 

17 

 
                                                           
1[(c) between such parties and on such terms as the Central Government may, by notification in 

the Official Gazette, specify.] 

19.  Stock  exchanges  other  than  recognised  stock  exchanges  prohibited.—(1)  No  person  shall, 
except with the permission of the Central Government, organise or assist in organising or be a member of 
any stock exchange (other than a recognised stock exchange) for purpose of assisting in, entering into or 
performing any contracts in securities. 

(2) This section shall come into force in any State or area on such date as the Central Government 

may, by notification in the Official Gazette, appoint. 

20.  [Prohibition  of  options  in  securities.]  Omitted  by  the  Securities  Laws  (Amendment)  Act,  1995              

(9 of 1995), s. 22 (w.e.f. 25-1-1995). 

2[21.  Conditions  for  listing.—Where  securities  are  listed  on  the  application  of  any  person  if  any 
recognised  stock  exchange,  such  person  shall  comply  with the conditions of the  listing  agreement  with 
that stock exchange.] 

3[21A.  Delisting  of  securities.—(1)  A  recognised  stock  exchange  may  delist  the  securities,  after 
recording the reasons therefor, from any recognised stock exchange on any of the ground or grounds as 
may be prescribed under this Act: 

Provided  that  the  securities  of  a  company  shall  not  be  delisted  unless  the  company  concerned  has 

been given a reasonable opportunity of being heard. 

(2)  A  listed  company  or  an  aggrieved  investor  may  file  an  appeal  before  the  Securities  Appellate 
Tribunal against the decision of the recognised stock exchange delisting the securities within fifteen days 
from the date of the decision of the recognised stock exchange delisting the securities and the provisions 
of sections 22B to 22E of this Act, shall apply, as far as may be, to such appeals: 

Provided that the Securities Appellate Tribunal may, if it is satisfied that the company was prevented 
by sufficient cause from filing the appeal within the said period, allow it to be filed within a further period 
not exceeding one month.] 

4[22. Right of appeal against refusal by stock exchanges to list securities of public companies.—
Where a recognised stock exchange acting in pursuance of any power given to it by its bye-laws, refuses 
to list the securities of any public company 5[or collective investment scheme], the company 2[or scheme] 
shall be entitled to be furnished with the reasons for such refusal, and may,— 

(a) within fifteen days from the date on which the reasons for such refusal are furnished to it, or 

(b)  where  the  stock  exchange  has  omitted  or  failed  to  dispose  of,  within  the  time  specified  in                   

sub-section (1) of section 73 of the Companies Act,1956 (1of 1956) (hereafter in this section referred 
to as the “specified time”), the application for permission for the shares or debentures to be dealt with 
on the stock exchange, within fifteen days from the date of expiry of specified time or within such 
further period, not exceeding one month, as the Central Government may, on sufficient cause being 
shown, allow, 

appeal  to  the  Central  Government  against  such  refusal,  omission  of  failure,  as  the  case  may  be,  and 
thereupon the Central Government may, after giving the stock exchange an opportunity of being heard,— 

(i) vary or set aside the decision of the stock exchange, or 

(ii)  where  the  stock  exchange  has  omitted  or  failed  to  dispose  of  the  application  within  the 

specified time, grant or refuse the permission, 

1.  Ins. by Act 20 of 2015, s. 134 (w.e.f. 14-5-2015). 
2. Subs. by Act 9 of 1995, s. 23, for section 21 (w.e.f. 25-1-1995). 
3. Ins. by Act 1 of 2005, s. 8 (w.e.f. 12-10-2004). 
4. Subs. by Act 41 of 1974, s. 42, for section 22 (w.e.f. 1-2-1975). 
5. Ins. by Act 31 of 1999, s. 5 (w.e.f. 22-2-2000). 

18 

 
                                                           
and where the Central Government sets aside the decision of the recognised stock exchange or grants the 
permission, the stock exchange shall act in conformity with the orders of the Central Government:] 

1[Provided that no appeal shall be preferred against refusal, omission or failure, as the case may be, 
under this section on and after the commencement of the Securities Laws(Second Amendment) Act, 1999 
(32 of 1999).] 

2[22A. Right of appeal to Securities Appellate Tribunal against refusal of stock exchange to list 
securities  of  public  companies.—(1)  Where  a  recognised  stock  exchange,  acting  in  pursuance  of  any 
power  given  to  it  by  its  bye-laws,  refuses  to  list  the  securities  of  any  company,  the  company  shall  be 
entitled to be furnished with reasons for such refusal, and may,— 

(a) within fifteen days from the date on which the reasons for such refusal are furnished to it, or 

(b) where the stock exchange has omitted or failed to dispose of, within the time specified in sub-
section (1A) of section 73 of the Companies Act, 1956 (1 of 1956) (hereafter in this section referred to 
as the “specified time”), the application for permission for the shares or debentures to be dealt with on 
the stock exchange, within fifteen days from the date of expiry of the specified time or within such 
further period, not exceeding one month, as the Securities Appellate Tribunal may, on sufficient cause 
being shown, allow, 

appeal to the Securities Appellate Tribunal having jurisdiction in the matter against such refusal, omission 
or failure, as the case may be, and thereupon the Securities Appellate Tribunal may, after giving the stock 
exchange, an opportunity of being heard,— 

(i) vary or set aside the decision of the stock exchange; or 

(ii)  where  the  stock  exchange  has  omitted  or  failed  to  dispose  of  the  application  within  the 

specified time, grant or refuse the permission, 

and where the Securities Appellate Tribunal sets aside the decision of the recognised, stock exchange or 
grants  the  permission,  the  stock  exchange  shall  act  in  conformity  with  the  orders  of  the  Securities 
Appellate Tribunal. 

(2) Every appeal under sub-section (1) shall be in such form and be accompanied by such fee as may 

be prescribed. 

(3) The Securities Appellate Tribunal shall send a copy of every order made by it to the Board and 

parties to the appeal. 

(4) The appeal filed before the Securities Appellate Tribunal under sub-section (1) shall be dealt with 
by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within 
six months from the date of receipt of the appeal. 

 22B.  Procedure  and  powers  of  Securities  Appellate  tribunal.—(1)  The  Securities  Appellate 
Tribunal shall not be bound by the procedure laid down by the Code of Civil Procedure, 1908 (5 of 1908), 
but shall be guided by the principles of natural justice and, subject to the other provisions of this Act and 
of  any  rules,  the  Securities  Appellate  Tribunal  shall  have  powers  to  regulate  their  own,  procedure 
including the places at which they shall have their sittings. 

(2) The Securities Appellate Tribunal shall have, for the purpose of discharging their functions under 

this  Act,  the  same  powers  as  are  vested  in  a  civil  court  under  the  Code  of  Civil  Procedure,  1908                  
(5 of 1908), while trying a suit, in respect of the following matters, namely:— 

(a) summoning and enforcing the attendance of any person and examining him on oath; 

(b) requiring the discovery and production of documents; 

(c) receiving evidence on affidavits; 

(d) issuing commissions for the examination of witnesses or documents; 

1. The proviso ins. by Act 32 of 1999, s. 4 (w.e.f. 16-12-1999). 
2. Ins. by s. 5, ibid. (w.e.f. 16-12-1999). 

19 

 
                                                           
(e) reviewing its decisions; 

(f) dismissing an application for default or deciding it ex parte; 

(g) setting aside any order of dismissal of any application for default or any order passed by it ex 

parte; and 

(h) any other matter which may be prescribed. 
(3)  Every  proceeding  before  the  Securities  Appellate  Tribunal  shall  be  deemed  to  be  a  judicial 
proceeding within the meaning of sections 193 and 228, and for the purposes of section 196 of the 
Indian Penal Code (45 of 1860) and the Securities Appellate Tribunal shall be deemed to be a civil 
court for all the purposes of section 195 and Chapter XXVI of the Code of Criminal Procedure, 1973 
(2 of 1974). 
22C. Right to legal representation.—The appellant may either appear in person or authorise one or 
more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its 
officers to present his or its case before the Securities Appellate Tribunal. 

Explanation.—For the purposes of this section,— 

(a) “chartered accountant” means a chartered accountant as defined in clause (b) of sub-section 
(1)  of  section  2  of  the  Chartered  Accountants  Act,  1949  (38  of  1949)  and  who  has  obtained  a 
certificate of practice under sub-section (1) of section 6 of that Act; 

(b) “company secretary” means a company secretary as defined in clause (c) of sub-section (1) of 
section 2 of the Company Secretaries Act, 1980 (56 of 1980), and who has obtained a certificate of 
practice under sub-section (1) of section 6 of that Act; 

(c)  “cost  accountant”  means  a  cost  accountant  as  defined  in  clause  (b)  of  sub-section  (1)  of 
section  2  of  the  Cost  and  Works  Accountants  Act,  1959  (23  of  1959)  and  who  has  obtained  a 
certificate of practice under sub-section (1) of section 6 of that Act; 

(d) “legal practitioner” means an advocate, vakil or an attorney of any High Court, and includes a 

pleader in practice. 

22D. Limitation.—The provisions of the Limitation Act, 1963 (36 of 1963) shall, as far as may be, 

apply to an appeal made to a Securities Appellate Tribunal. 

22E. Civil Court not to have jurisdiction.—No civil court shall have jurisdiction to entertain any 
suit  or  proceeding  in  respect  of  any  matter  which  a  Securities  Appellate  Tribunal  is  empowered  by  or 
under this Act to determine and no injunction shall be granted by any court or other authority in respect of 
any action taken or to be taken in pursuance of any power conferred by or under this Act.  

22F.Appeal  to  High  Court.—Any  person aggrieved  by  any  decision  or  order  of  the  Securities 
Appellate  Tribunal  may  file  an  appeal  to  the  High  Court  within  sixty  days  from  the  date  of 
communication  of the  decision  or  order  of the  Securities  Appellate Tribunal to him  on  any  question  of 
fact or law arising out of such order: 

Provided that the High Court may, if it is satisfied that the appellant was prevented by sufficient cause 
from  filing  the appeal  within  the  said  period,  allow  it  to  be filed  within  a further  period  not exceeding 
sixty days.] 

23. Penalties.—(1) Any person who— 

PENALTIES AND PROCEDURE 

(a) without reasonable excuse (the burden of proving which shall be on him) fails to comply with 

any requisition made under sub-section (4) of section 6; or 

(b) enters into any contract in contravention of any of the  provisions contained in section 13 or 

section 16; or 

(c) contravenes the provisions contained in 1[section 17 or section 17A], or section 19; or 

1. Subs. by Act 27 of 2007, s. 4, for “section 17” (w.e.f. 28-5-2007). 

20 

 
                                                           
1[(d)  enters  into  any  contract  in  derivative  in  contravention  of  section  18A  or  the  rules  made 

under section 30.] 

(e) owns or keeps a place other than that of a recognised stock exchange which is used for the 
purpose of entering into or performing any contracts in contravention of any of the provisions of this 
Act and knowingly permits such place to be used for such purposes; or 

(f)  manages,  controls,  or  assists  in  keeping  any  place  other  than  that  of  a  recognised  stock 
exchange which is used for the purpose of entering into or performing any contracts in contravention 
of  any  of  the  provisions  of  this  Act  or  at  which  contracts  are  recorded  or  adjusted  or  rights  or 
liabilities arising out of contracts are adjusted, regulated or enforced in any manner whatsoever; or 

(g) not being a member of a recognised stock exchange or his agent authorised as such under the 
rules or bye-laws of such stock exchange or not being a dealer in securities licensed under section 17 
wilfully represents to or induces any person to believe that contracts can be entered into or performed 
under this Act through him; or 

(h) not being a member of a recognised stock exchange or his agent authorised as such under the 
rules or bye-laws of such stock exchange or not being a dealer in securities licensed under section 17, 
canvasses, advertises or touts in any manner either for himself or on behalf of any other persons for 
any business connected with contracts in contravention of any of the provisions of this Act; or 

(i) joins, gathers or assists in gathering at any place other than the place of business specified in 
the bye-laws of a recognised stock exchange any person or persons for making bids or offers or for 
entering into or performing any contracts in contravention of any of the provisions of this Act; 

2[shall,  without  prejudice  to  any  award  of  penalty  by  the  Adjudicating  Officer  3[or  the  Securities  and 
Exchange  Board  of  India]  under  this  Act,  on  conviction,  be  punishable  with  imprisonment  for  a  term 
which may extend to ten years or with fine, which may extend to twenty-five crore rupees or with both] 

(2) Any person who enters into any contract in contravention of the provisions contained in section 
154[or who fails to comply with the provisions of5[section 21 or section 21A]  or with the orders of] or 
who  or  section  226[or  with  the  orders  of  the  Securities  Appellate  Tribunal]  shall,  on  conviction,  be 
punishable with fine which may extend to one thousand rupees. 

7[23A. Penalty for failure to furnish information, return, etc.—Any person, who is required under 

this Act or any rules made thereunder,— 

(a)  to  furnish  any  information,  document,  books,  returns  or  8[report  to  a  recognised  stock 
exchange  or to  the  Board, fails  to  furnish  the  same  within  the  time  specified therefor  in the  listing 
agreement  or  conditions  or  bye-laws  of  the  recognised  stock  exchange  or  the  Act  or  rules  made 
thereunder, or who furnishes] 9[false, incorrect or incomplete information, document, books, return or 
report],  shall  be  liable  to  a  penalty  10[which  shall  not  be  less  than  one  lakh  rupees  but  which  may 
extend to one lakh rupees for each during which such failure continues subject to a maximum of one 
crore rupees], whichever is less for each such failure;  

(b) to maintain books of account or records, as per the listing agreement or conditions, or bye-
laws of a recognised stock exchange, fails to maintain the same, shall be liable to a penalty 7[which 
shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during 
which such failure continues subject to a maximum of one crore rupees].] 

1. Ins. by Act 31 of 1999, s. 6 (w.e.f. 22-2-2000). 
2. Subs. by Act 1 of 2005, s. 21, for certain words (w.e.f. 12-10-2004). 
3. Ins. by Act 13 of 2018, s. 148 (w.e.f. 8-3-2019). 
4. Subs. by Act 9 of 1995, s. 24, for “or who fails to comply with the orders of the Securities and Exchange Board of India under 

section 21” (w.e.f. 25-1-1995). 

5. Subs. by Act 1 of 2005, s. 10, for “section 21” (w.e.f. 12-10-2004). 
6. Ins. by Act 32 of 1999, s. 6 (w.e.f. 16-10-1999). 
7. Ins. by Act 1 of 2005, s. 11 (w.e.f. 12-10-2004). 
8. Subs. by Act 23 of 2019, s. 146, for certain words (w.e.f. 20-1-2020). 
9. Ins. by Act 13 of 2018, s. 149 (w.e.f. 8-3-2019). 
10. Subs. by Act 27 of 2014, s. 25, for “of one lakh rupees for each day during which such failure continues or one crore rupees, 

whichever is less” (w.e.f. 8-9-2014) 

21 

 
                                                           
23B. Penalty for failure by any person to enter into an agreement with clients.—If any person, 
who is required under this Act or any bye-laws of a recognised stock exchange made thereunder, to enter 
into  an  agreement  with  his  client,  fails  to  enter  into  such  an  agreement,  he  shall  be  liable  to  a 
penalty 1[which shall not be less than one lakh rupees but which may extend to one lakh rupees for each 
day during which such failure continues subject to a maximum of one crorerupees] for every such failure. 

23C. Penalty for failure to redress Investors grievances.—If any stock broker or sub-broker or a 
company whose securities are listed or proposed to be listed in a recognised stock exchange, after having 
been  called  upon  by  the  Securities  and  Exchange  Board  of  India  or  a  recognised  stock  exchange  in 
writing,  to  redress  the  grievances  of  the  investors,  fails  to  redress  such  grievances  within  the  time 
stipulated by the Securities and Exchange Board of India or a recognised stock exchange, he or it shall be 
liable to a penalty 2[which shall not be less than one lakh rupees but which may extend to one lakh rupees 
for each day during which such failure continues subject to a maximum of one crore rupees].] 

23D. Penalty for failure to segregate securities or moneys of client or clients.—If any person, who 
is registered under section 12 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) as a 
stock  broker  or  sub-broker,  fails  to  segregate  securities  or  moneys  of  the  client  or  clients  or  uses  the 
securities or moneys of a client or clients for self or for any other client, he shall be 3[liable to a penalty 
which shall not be less than one lakh rupees but which may extend to one crore rupees]. 

23E.  Penalty  for  failure  to  comply  with  of  listing  conditions  or  delisting  conditions  or 
grounds.—If a company or any person managing collective investment scheme or mutual fund4[or real 
estate investment trust or infrastructure investment trust or alternative investment fund], fails to comply 
with the listing conditions or delisting conditions or grounds or commits a breach thereof, it or he shall 
be 5[liable to a penalty which shall not be less than five lakh rupees but which may extend to twenty-five 
crore rupees]. 

23F.  Penalty  for  excess  dematerialisation  or  delivery  of  unlisted  securities.—If  any  issuer 
dematerialises securities more than the issued securities of a company or delivers in the stock exchanges 
the securities which are not listed in the recognised stock exchange or delivers securities where no trading 
permission has been given by the recognised stock exchange, he shall be 6[liable to a penalty which shall 
not be less than five lakh rupees but which may extend to twenty-five crore rupees]. 

23G. Penalty for failure to furnish periodical returns, etc.—If a recognised stock exchange fails or 
neglects to furnish periodical returns 7[or furnishes false, incorrect or incomplete periodical returns] to the 
Securities  and  Exchange  Board  of  India  or  fails  or  neglects  to  make  or  amend  its  rules  or  bye-laws  as 
directed by the Securities and Exchange Board of India or fails to comply with directions issued by the 
Securities  and  Exchange  Board  of  India,  such  recognised  stock  exchange  shall  be 8[liable  to  a  penalty 
which shall not be less than five lakh rupees but which may extend to twenty-five crore rupees]. 

9[23GA.  Penalty  for  failure  to  conduct  business  in  accordance  with  rules,  etc.—Where  astock 
exchange or a clearing corporation fails to conduct its business with its members or any issuer or its agent 
or any person associated with the securities markets in accordance with the rules or regulations mad by 
the  Securities  and  Exchange  Board  of  India  and  the  directions  issued  by  it  under  this  Act,  the  stock 
exchange or the clearing corporations, as the case may  be, shall be liable to penalty which shall not be 
less than five crore rupees but which may extend to twenty-five crore rupees or three times the amount of 
gains made out of such failure, whichever is higher.] 

1. Subs. by Act 27 of 2014, s. 26, for “of one lakh rupees for each day during which such failure continues or one crore rupees, 

whichever is less” (w.e.f. 8-9-2014). 

2. Subs. by s. 27, ibid.,for “of one lakh rupees for each day during which such failure continues or one crore rupees, whichever is 

less” (w.e.f. 8-9-2014). 

3. Subs. by s. 28, ibid., for “liable to a penalty not exceeding one crore rupees” (w.e.f. 8-9-2014). 
4. Ins. by Act 13 of 2018, s. 150 (w.e.f. 8-3-2019). 
5. Subs. by Act 27 of 2014, s. 29, for “liable to a penalty not exceeding twenty-five crore rupees” (w.e.f. 8-9-2014). 
6. Subs. by s. 30, ibid., for  “liable to a penalty not exceeding twenty-five crore rupees” (w.e.f. 8-9-2014). 
7. Ins. by Act 13 of 2019, s. 151 (w.e.f. 8-3-2019). 
8. Subs. by Act 27 of 2014, s. 31, for “liable to a penalty not exceeding twenty-five crore rupees” (w.ef. 8-9-2014). 
9. Ins. by Act 13 of 2018, s. 152 (w.e.f. 8-3-2019). 

22 

 
                                                           
23H. Penalty for contravention where no separate penalty has been provided.—Whoever fails to 
comply  with  any  provision  of  this  Act,  the  rules  or  articles  or  bye-laws  or  the  regulations  of  the 
recognised stock exchange or directions issued by the Securities and Exchange Board of India for which 
no separate penalty has been provided, shall be 1[liable to a penalty which shall not be less than one lakh 
rupees but which may extend to one crore rupees]. 

23-I. Power to adjudicate.—(1) For the purpose of adjudging under sections 23A, 23B, 23C, 23D, 
23E, 23F, 23G and 23H, the Securities and Exchange Board of India 2[may] appoint any officer not below 
the rank of a Division Chief of the Securities and Exchange Board of India to be an adjudicating officer 
for  holding  an  inquiry  in  the  prescribed  manner  after  giving  any  person  concerned  a  reasonable 
opportunity of being heard for the purpose of imposing any penalty. 

(2) While holding an inquiry, the adjudicating officer shall have power to summon and enforce the 
attendance of any person acquainted with the facts and circumstances of the case to give evidence or to 
produce any document, which in the opinion of the adjudicating officer, may be useful for or relevant to 
the  subject-matter  of  the  inquiry  and  if,  on  such  inquiry,  he  is  satisfied  that  the  person  has  failed  to 
comply  with  the  provisions  of  any  of  the  sections  specified  in  sub-section  (1),  he  may  impose  such 
penalty as he thinks fit in accordance with the provisions of any of those sections. 

3[(3) The Board may call for and examine the record of any proceedings under this  section and if it 
considers  that  the  order  passed  by  the  adjudicating  officer  is  erroneous  to  the  extent  it  is  not  in  the 
interests  of  the  securities  market,  it  may,  after  making  or  causing  to  be  made  such  inquiry  as  it  deems 
necessary, pass an order enhancing the quantum of penalty, if the circumstances of the case so justify: 

Provided  that  no  such  order  shall  be  passed  unless  the  person  concerned  has  been  given  an 

opportunity of being heard in the matter: 

Provided  further  that  nothing  contained  in  this  sub-section  shall  be  applicable  after  an  expiry  of  a 
period  of  three  months  from  the  date  of the  order  passed  by  the  adjudicating  officer  or  disposal  of  the 
appeal under section 23L, whichever is earlier.] 

23J. 4[Factors to be taken into account while adjudging quantum of penalty.]—While adjudging 
the quantum of penalty under 5[section 12A or section 23-I], 6[the Securities and Exchange Board of India 
or the adjudicating officer] shall have due regard to the following factors, namely:— 

(a)  the  amount  of  disproportionate  gain  or  unfair  advantage,  wherever  quantifiable,  made  as  a 

result of the default; 

(b) the amount of loss caused to an investor or group of investors as a result of the default; 

(c) the repetitive nature of the default. 

7[23JA.  Settlement  of  administrative  and  civil  proceedings.—(1)  Notwithstanding  anything 
contained in any other law for the time being in force, any person, against whom any proceedings have 
been initiated or may be initiated under section 12A or section 23-1, may file an application in writing to 
the Board proposing for settlement of the proceedings initiated or to be initiated for the alleged defaults. 

(2) The Board may, after taking into consideration the nature, gravity and impact of defaults, agree to 
the proposal for settlement, on payment of such sum by the defaulter or on such other terms as may be 
determined  by  the  Board  in  accordance  with  the  regulations  made  under  the  Securities  and  Exchange 
Board of India Act, 1992(15 of 1992). 

(3) For the purposes of settlement under this section, the procedure as specified by the Board under 

the Securities and Exchange Board of India Act, 1992(15 of 1992) shall apply. 

1. Subs. byAct 27 of 2014, s. 32, for “liable to a penalty not exceeding twenty-five crorerupess” (w.e.f. 8-9-2014). 
2. Subs. by Act 13 of 2019, s. 153, for “shall” (w.e.f. 8-3-2019). 
3. Ins. byAct 27 of 2014, s. 33 (w.e.f. 8-9-2014). 
4. Subs. by Act 13 of 2019, s. 154, for “Factors to be taken into account by adjudicating officer” (w.e.f.  8-3-2019). 
5. Subs. by s. 154, ibid., for “section 23-I” (w.e.f. 8-3-2019). 
6. Subs. by s. 154, ibid., for “the adjudicating officer” (w.e.f. 8-3-2019). 
7. Ins. by s. 34, ibid. (w.e.f. 20-4-2007). 

23 

 
                                                           
(4) No appeal shall lie under section 23L against any order passed by the Board or the adjudicating 

officer, as the case may be, under this section.] 

1[(5) All settlement amounts, excluding the disgorgement amount and legal costs, realised under this 

Act shall be credited to the Consolidated Fund of India.] 

2[23JB. Recovery of amounts.—(1) If a person fails to pay the penalty imposed 3[under this Act] or 
fails to comply with a direction of disgorgement order issued under section 12A or fails to pay any fees 
due to the Board, the Recovery Officer may draw up under his signature a statement in the specified form 
specifying the amount due from the person (such statement being hereafter in this Chapter referred to as 
certificate) and shall proceed to recover from such person the amount specified in the certificate by one or 
more of the following modes, namely:— 

(a) attachment and sale of the person”s movable property; 

(b) attachment of the person”s bank accounts; 

(c) attachment and sale of the person”s immovable property; 

(d) arrest of the person and his detention in prison; 
(e) appointing a receiver for the management of the person”s movable and immovable properties, 
and  for  this  purpose, the  provisions  of  sections  220  to  227,  228A,  229,  232, the  Second  and  Third 
Schedules  to  the  Income-tax  Act,  1961(43  of  1961)  and  the  Income-tax  (Certificate  Proceedings) 
Rules, 1962, as in force from time to time, in so far as may be, apply with necessary modifications as 
if  the  said  provisions  and  the  rules  thereunder  were  the  provisions  of  this  Act  and  referred  to  the 
amount due under this Act instead of to income-tax under the Income-tax Act, 1961. 
Explanation 1.—For the purposes of this sub-section, the person”s movable or immovable property or 
monies held in bank accounts shall include any property or monies held in bank accounts which has been 
transferred, directly or indirectly on or after the date when the amount specified in certificate had become 
due,  by  the  person  to  his spouse or  minor  child  or  son”s  wife  or son”s  minor child,  otherwise  than for 
adequate consideration, and which is held by, or stands in the name of, any of the persons aforesaid; and 
so far as the movable or immovable property or monies held in bank accounts so transferred to his minor 
child or his son”s minor child is concerned, it shall, even after the date of attainment of majority by such 
minor child or son”s minor child, as the case may be, continue to be included in the person”s movable or 
immovable  property  or  monies  held  in  bank  accounts  for  recovering  any  amount  due  from  the  person 
under this Act. 

Explanation  2.—Any  reference  under  the  provisions  of  the  Second  and  Third  Schedules  to  the 
Income-tax  Act,  1961(43  of  1961)  and  the  Income-tax  (Certificate  Proceedings)  Rules,  1962  to  the 
assessee shall be construed as a reference to the person specified in the certificate. 

Explanation 3.—Any reference to appeal in Chapter XVIID and the Second Schedule to the Income-
tax  Act,  1961(43  of  1961),  shall  be  construed  as  a  reference  to  appeal  before  the  Securities  Appellate 
Tribunal under section 23L of this Act. 

(2)  The  Recovery  Officer  shall  be  empowered  to  seek  the  assistance  of  the  local  district 

administration while exercising the powers under sub-section (1). 

(3) Notwithstanding anything contained in any other law for the time being in force, the recovery of 
amounts  by  a  Recovery  Officer  under  sub-section  (7),  pursuant  to  non-compliance  with  any  direction 
issued by the Board under section 12A, shall have precedence over any other claim against such person. 

(4)  For  the  purposes  of  sub-sections  (1), (2)  and  (3),  the  expression "Recovery Officer"  means  any 
officer of the Board who may be authorised, by general or special order in writing to exercise the powers 
of a Recovery Officer.] 

1. Ins. by Act 13 of 2019, s. 155 (w.e.f. 8-3-2019). 
2. Ins. by Act 27 of 2014, s. 35. (w.e.f. 8-9-2014). 
3. Subs. by Act 13 of 2018, s. 156, for “by the adjudicating officer” (w.e.f. 8-3-2019). 

24 

 
                                                           
1[23JC. Continuance of proceedings.—Where a person dies, his legal representative shall be liable 
to pay any sum which the deceased would have been liable to pay, if he had not died, in the like manner 
and to the same extent as the deceased: 

Provided that, in case of any penalty payable under this Act, a legal representative shall be liable only 

in case the penalty has been imposed before the death of the deceased person. 

(2) For the purposes of sub-section (1),— 

 (a)  any  proceeding  for  disgorgement,  refund  or  an  action  for  recovery  before  the  Recovery 
Officer under this Act, except a proceeding for levy of penalty, initiated against the deceased before 
his  death  shall  be  deemed  to  have  been  initiated  against  the  legal  representative,  and  may  be 
continued against the legal representative from the stage at which it stood on the date of the death of 
the deceased and all the provisions of this act shall apply accordingly; 

(b)  any  proceeding  for  disgorgement,  refund  or  an  action  for  recovery  before  the  Recovery 
Officer  under  this  Act,  except  a  proceeding  for  levy  of  penalty,  which  could  have  been  initiated 
against the deceased if he  had survived, may be initiated against the legal representative and all the 
provisions of this Act shall apply accordingly. 

(3) Every legal representative shall be personally liable for any sum payable by him in his capacity as 
legal representative if, while his liability for such sum remains undercharged, he creates a charge on or 
disposes  of  or  pasts  with  any  assets  of  the  estate  of  the  deceased,  which  are  in,  or  may  come  into,  his 
possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted 
with. 

(4) The liability of a legal representative under this section shall, be limited to the extent to which the 

estate of the decreased is capable of meeting the liability. 

Explanation.—For  the  purpose  of  this  section  “Legal  representative”  means  a  person  who  in  law 
represents the estate of a deceased person, and includes any person who intermeddles with the estate of 
the  deceased  and  where  a  party  sued  or  is  sued  in  a  representative  character,  the  person  on  whom  the 
estate devolves on the death of the party so suing or sued.] 

23K.  Crediting  sum  realised  by  way  of  penalties  to  Consolidated  Fund  of  India.—All  sums 

realised by way of penalties under this Act shall be credited to the Consolidated Fund of India. 

23L. Appeal to Securities Appellate Tribunal.—(1) Any person aggrieved, by the order or decision 
of  the  recognised  stock  exchange  or  the  adjudicating  officer  or  any  order  made  by  the  Securities  and 
Exchange  Board  of  India  under  section  4B 2[or  sub-section  (3)  of  section  23-I],  may  prefer  an  appeal 
before the  Securities  Appellate Tribunal  and  the  provisions  of  sections  22B, 22C,  22D  and 22E  of  this 
Act, shall apply, as far as may be, to such appeals. 

(2) Every appeal under sub-section (1) shall be filed within a period of forty-five days from the date 
on which a copy of the order or decision is received by the appellant and it shall be in such form and be 
accompanied by such fee as may be prescribed: 

Provided that the Securities Appellate Tribunal may  entertain an appeal after the expiry of the said 
period of forty-five days if it is satisfied that there was sufficient cause for not filing it within that period. 
(3) On receipt of an appeal under sub-section (1), the Securities Appellate Tribunal may, after giving 
the  parties  to  the  appeal,  an  opportunity  of  being  heard,  pass  such  orders  thereon  as  it  thinks  fit, 
confirming, modifying or setting aside the order appealed against. 

(4) The Securities Appellate Tribunal shall send a copy of every order made by it to the parties to the 

appeal and to the concerned adjudicating officer. 

(5) The appeal filed before the Securities Appellate Tribunal under sub-section (1) shall be dealt with 
by it as expeditiously as possible and endeavour shall be made by it to dispose of the appeal finally within 
six months from the date of receipt of the appeal. 

1. Ins. by Act 13 of 2018, s. 157 (w.e.f. 8-3-2019). 
2. Ins. by Act 27 of 2014, s. 36 (w.e.f. 8-9-2014). 

25 

 
                                                           
23M. Offences.—(1) Without prejudice  to  any  award  of  penalty  by  the  adjudicating  officer1[or the 
Securities  and  Exchange  Board  of  India]  under  this  Act,  if  any  person  contravenes  or  attempts  to 
contravene or abets the contravention of the provisions of this Act or of any rules or regulations or bye-
laws made thereunder, for which no punishment is provided elsewhere in this Act, he shall be punishable 
with imprisonment for a term which may extend to ten years, or with fine, which may extend to twenty-
five crore rupees or with both. 

(2) If any person fails to pay the penalty imposed by the adjudicating officer1[or the Securities and 
Exchange Board of India]  or fails to comply with  2[the direction or order], he shall be punishable with 
imprisonment for a term which shall not be less than one month but which may extend to ten years, or 
with fine, which may extend to twenty-five crore rupees, or with both. 

23N.  Composition  of  certain  offences.—Notwithstanding  anything  contained  in  the  Code  of 
Criminal  Procedure,  1973  (2  of  1974),  any  offence  punishable  under  this  Act,  not  being  an  offence 
punishable with imprisonment only, or with imprisonment and also with fine, may either before or after 
the  institution  of  any  proceeding,  be  compounded  by  a  Securities  Appellate  Tribunal  or  a  court  before 
which such proceedings are pending. 

23-O.  Power  to  grant  immunity.—(1)  The  Central  Government  may,  on  recommendation  by  the 
Securities and Exchange Board of India, if the Central Government is satisfied, that any person, who is 
alleged to have violated any of the provisions of this Act or the rules or the regulations made thereunder, 
has made a full and true disclosure in respect of alleged violation, grant to such person, subject to such 
conditions as it may think fit to impose, immunity from prosecution for any offence under this Act, or the 
rules or the regulations made thereunder or also from the imposition of any penalty under this Act with 
respect to the alleged violation: 

Provided  that  no  such  immunity  shall  be  granted  by  the  Central  Government  in  cases  where  the 
proceedings  for  the  prosecution  for  any  such  offence  have  been  instituted  before  the  date  of  receipt  of 
application for grant of such immunity: 

Provided futher that the recommendations of the Securities and Exchange Board of India under this 

sub-section shall not be binding upon the Central Government. 

(2)  An  immunity  granted to  a  person  under  sub-section  (1)  may,  at  any  time,  be  withdrawn  by  the 
Central Government, if it is satisfied that such person had, in the course of the proceedings, not complied 
with the condition on which the immunity was granted or had given false evidence, and thereupon such 
person  may  be  tried  for  the  offence  with  respect  to  which  the  immunity  was  granted  or  for  any  other 
offence  of  which  he  appears  to  have  been  guilty  in  connection  with  the  contravention  and  shall  also 
become  liable  to  the  imposition  of  any  penalty  under  this  Act  to  which  such  person  would  have  been 
liable, had not such immunity been granted.] 

24.  3[Contravention by companies].—(1) Where  4[a contravention of any of the provisions of this 
Act  or  any  rule,  regulations,  direction  or  order  made  thereunder]  has  been  committed  by  a  company, 
every person who, at the time when the offence was committed, was in charge of, and was responsible to, 
the company for the conduct of the business of the company, as well as the company, shall be deemed to 
be guilty of the offence, and shall be liable to be proceeded against and punished accordingly: 

Provided  that  nothing  contained  in  this  sub-section  shall  render  any  such  person  liable  to  any 
punishment provided in this Act, if he proves that the offence was committed  without his knowledge or 
that he exercised all due diligence to prevent the commission of such offence. 

(2)  Notwithstanding  anything  contained  in  sub-section  (1),  where  5[a  contravention  of  any  of  the 
provisions of this Act or any rule, regulation, direction or order made thereunder] has been committed by 
a company and is proved that the 6[contravention] has been committed with the consent or connivance of, 
or is attributable to any gross negligence on the part of any director, manager, secretary or other officer of 
the company, such director, manager, secretary or other officer of the company, shall also be deemed to 
be guilty of that 6[offence] and shall be liable to be proceeded against and punished accordingly. 

1. Ins. by Act 13 of 2018, s. 158 (w.e.f. 8-3-2019). 
2. Subs. by s. 158, ibid.,for “any of his directions or orders” (w.e.f. 8-3-2019). 
3. Subs. by s. 159, ibid., for “Offences by companies” (w.e.f. 8-3-2019). 
4. Subs. by s. 159, ibid., for “an offence” (w.e.f. 8-3-2019). 
5. Subs. by s. 159, ibid., for “an offence under this Act” (w.e.f. 8-3-2019). 
6. Subs. by s. 159, ibid., for “offence” (w.e.f. 8-3-2019). 

26 

 
                                                           
1[(3) The provisions of this section shall be in addition to and not in derogation of, the provisions of 

section 22A.] 

Explanation .—For the purpose of this section,— 

(a) “company”means any body corporate and includes a firm or other association of individuals, 

and 

2[(b) “director”, in relation to— 

(i) a firm, means a partner in the firm; 

(ii) any association of persons or a body of individuals, means any  member controlling the 

affairs thereof.] 

25.  Certain  offences  to  be  cognizable.—Notwithstanding  anything  contained  in  the  Code  of 
Criminal Procedure, 1898 (5 of 1898), any offence punishable under 3***section 23 shall be deemed to be 
cognizable offence within the meaning of that Code. 

4[26.Cognizance  of  offences  by  courts.—(1)  No  court  shall  take  cognizance  of  any  offence 
punishable under this Act or any rules or regulations or bye-laws made thereunder, save on a complaint 
made by the Central Government or State Government or the Securities and Exchange Board of India or a 
recognised stock exchange or by any person.] 

5* 

* 

* 

* 

*] 

6[26A.  Establishment  of  Special  Courts.—(1)  The  Central  Government  may,  for  the  purpose  of 
providing speedy trial of offences under this Act, by notification, establish or designate as many Special 
Courts as may be necessary. 

(2) A Special Court shall consist of a single judge who shall be appointed by the Central Government 
with  the  concurrence  of  the  Chief  Justice  of  the  High  Court  within  whose  jurisdiction  the  judge  to  be 
appointed is working. 

(3)  A  person  shall  not  be  qualified  for  appointment  as  a  judge  of  a  Special  Court  unless  he  is, 
immediately before such appointment, holding the office of a Sessions Judge or an Additional Sessions 
Judge, as the case may be. 

26B.  Offences  triable  by  Special  Courts.—Notwithstanding  anything  contained  in  the  Code  of 
Criminal  Procedure,  1973(2  of  1974),  all  offences  under  this  Act  committed  prior  to  the  date  of 
commencement  of  the  Securities  Laws  (Amendment)  Act,  2014  or  on  or  after  the  date  of  such 
commencement, shall be taken cognizance of and tried by the Special Court established for the area in 
which the offence is committed or where there are more Special Courts than one for such area, by such 
one of them as may be specified in this behalf by the High Court concerned.] 

26C.  Appeal  and  Revision.—The  High  Court  may  exercise,  so  far  as  may  be  applicable,  all  the 
powers conferred by Chapters XXIX and XXX of the Code of Criminal Procedure, 1973(2 of 1974) on a 
High Court, as if a Special Court within the local limits of the jurisdiction of the High Court were a Court 
of Session trying cases within the local limits of the jurisdiction of the High Court. 

26D. Application of Code to proceedings before Special Court.—(1) Save as otherwise provided 
in  this  Act,  the  provisions  of  the  Code  of  Criminal  Procedure,  1973(2  of  1974)  shall  apply  to  the 
proceedings before a Special Court and for the purposes of the said provisions, the Special Court shall be 
deemed to be a Court of Session and the person conducting prosecution before a Special Court shall be 
deemed to be a Public Prosecutor within the meaning of clause (u) of section 2 of the Code of Criminal 
Procedure, 1973. 

1. Ins. by Act 40 of 1985, s. 3 (w.e.f. 17-1-1986). 
2. Subs. by Act 31 of 1999, s. 7, for sub-section (2) (w.e.f. 22-2-2000). 
3. The words and brackets “sub-section (1) of” omitted by Act 1 of 2005, s. 12 (w.e.f. 12-10-2004). 
4. Subs. by s. 13, ibid., for section 26 (w.e.f. 12-10-2004). 
5. Omitted by Act 27 of 2014, s. 38 (w.e.f. 8-9-2014). 
6. Ins. by s. 38, ibid. (w.e.f. 8-9-2014). 

27 

 
 
 
 
 
 
 
 
 
                                                           
 
(2) The person conducting prosecution referred to in sub-section (1) should have been in practice as 
an advocate for not less than seven years or should have held a post, for a period of not less than seven 
years, under the Union or a State, requiring special knowledge of law. 

26E. Transitional provisions.—Any offence committed under this Act, which is triable by a Special 
Court shall, until a Special Court is established, be taken cognizance of and tried by a Court of Session 
exercising  jurisdiction  over  the  area,  notwithstanding  anything  contained  in  the  Code  of  Criminal 
Procedure, 1973(2 of 1974): 

Provided that nothing contained in this section shall affect the powers of the High Court under section 
407 of the Code to transfer any case or class of cases taken cognizance by a  court of session under this 
section.] 

MISCELLANEOUS 

27. Title to dividends.—(1) It shall be lawful for the holder of any security whose name appears on 
the  books  of  the  company  issuing  the  said  security  to  receive  and  retain  any  dividend  declared  by  the 
company  in  respect  thereof  for  any  year,  notwithstanding  that  the  said  security  has  already  been 
transferred by him for consideration, unless the transferee who claims the dividend from the transferor has 
lodged  the  security  and  all  other  documents  relating  to  the  transfer  which  may  be  required  by  the 
company with the company for being registered in his name within fifteen days of the date on which the 
dividend became due. 

Explanation. — The period specified in this section shall be extended— 

(i) in  case  of  death  of  the  transferee,  by  the  actual  period  taken  by  his  legal  representative  to 

establish his claim to the dividend; 

(ii)  in  case  of  loss  of  transfer  deed  by  theft  or  any  other  cause  beyond  the  control  of 

the  transferee, by the actual period taken for the replacement thereof; and 

(iii) in case of delay in the lodging of any  security and other documents relating to the transfer 

due to causes connected with the post, by the actual period of the delay. 

(2) Nothing contained in sub-section (1) shall affect— 

(a)  the  right  of  a  company  to  pay  the  dividend  which  has  become  due  to  any  person  whose 
name is for the time being registered in the books of the company as the holder of the security in 
respect of which the dividend has become due; or 

(b)  the  right  of  the  transferee  of  any  security  to  enforce  against  the  transferor  or  any  other 
person his rights, if any, in relation to the transfer in any case, where the company has refused to 
register the transfer of the security in the name of the transferee. 

1[27A. Right to receive income from collective investment scheme.—(1) It shall be lawful for the 
holder  of  any  securities,  being  units  or  other  instruments  issued  by  the  collective  investment  scheme, 
whose name appears on the books of the collective investment scheme issuing the said security to receive 
and retain any income in respect of units or other instruments issued by the collective investment scheme 
declared by the collective investment scheme in respect thereof for any year, notwithstanding that the said 
security,  being  units  or  other instruments issued  by  the  collective  investment  scheme,  has  already  been 
transferred by him for consideration, unless the transferee who claims the income in respect of units or 
other instruments issued by the collective investment scheme from the transfer or has lodged the security 
and  all  other  documents  relating  to  the  transfer  which  may  be  required  by  the  collective  investment 
scheme with the collective investment scheme for being registered in his name within fifteen days of the 
date  on  which  the  income  in  respect  of  units  or  other  instruments  issued  by  the  collective  investment 
scheme became due. 

1. Ins. by Act 31 of 1999, s. 8 (w.e.f. 22-2-2000). 

28 

 
 
 
                                                           
Explanation.—The period specified in this section shall be extended— 

(i)  in  case  of  death  of  the  transferee,  by  the  actual  period  taken  by his  legal  representative  to 
establish his  claim  to  the  income  in  respect  of  units  or  other  instrument  issued  by  the  collective 
investment scheme; 

(ii)  in  case  of  loss  of  the  transfer  deed  by  theft  or  any  other  cause  beyond  the  control  of  the 

transferee, by the actual period taken for the replacement thereof; and 

(iii) in case of delay in the lodging of any security, being units or other instruments issued by the 
collective investment scheme, and other documents relating to the transfer due to causes connected 
with the post, by the actual period of the delay. 

(2) Nothing contained in sub-section (1) shall affect— 

(a) the right of a collective investment scheme to pay any income from units or other instruments 
issued by the collective investment scheme which has become due to any person whose name is for 
the  time  being  registered  in  the  books  of  the  collective  investment  scheme  as  the  holder  of  the 
security  being  units  or  other  instruments  issued  by  the  collective  investment  scheme  in  respect  of 
which the income in respect of units or other instruments issued by the collective scheme has become 
due; or 

(b) the right of transferee of any security, being units or other instruments issued by the collective 
investment scheme, to enforce against the transferor or any other person his rights, if any, in relation 
to the transfer in any case where the company has refused to register the transfer of the security being 
units or other instruments issued by the collective investment scheme in the name of the transferee.] 

1[27B.  Right  to  receive  income  from  mutual  fund.—(1)  It  shall  be  lawful  for  the  holder  of  any 
securities, being units or other instruments issued by any mutual fund, whose name appears on the books 
of the mutual fund issuing the said security to receive and retain any income in respect of units or other 
instruments  issued  by  the  mutual  fund  declared  by  the  mutual  fund  in  respect  thereof  for  any  year, 
notwithstanding  that  the  said  security,  being  units  or  other  instruments  issued  by  the  mutual  fund,  has 
already been transferred by him for consideration, unless the transferee who claims the income in respect 
of units or other instruments issued by the mutual fund from the transferor has lodged the security and all 
other documents relating to the transfer which may be required by the mutual fund with the mutual fund 
for being registered in his name within fifteen days of the date on which the income in respect of units or 
other instruments issued by the mutual fund became due. 

Explanation.—The period specified in this section shall be extended— 

(i)  in  case  of  death  of  the  transferee,  by  the  actual  period  taken  by  his  legal  representative  to 

establish his claim to the income in respect of units or other instrument issued by the mutual fund; 

(ii) in case of loss of the transfer deed by theft or any other cause beyond the control of transferee, 

by the actual period taken for the replacement thereof; 

(iii) in case of delay in the lodging of any security, being units or other instruments issued by the 
mutual fund, and other documents relating to the transfer due to causes connected with the post, by 
the actual period of the delay. 

(2) Nothing contained in sub-section (1) shall affect— 

(a) the right of a mutual fund to pay any income from units or other instruments issued by the 
mutual fund which has become due to any person, whose name is for the time being registered in the 
books of the mutual fund as the holder of the security being units or other instruments issued by the 
mutual fund in respect of which the income in respect of units or other instruments issued by mutual 
fund has become due; or 

(b) the right of transferee of any security, being units or other instruments issued by the mutual 
fund, to enforce against the transferor or any other person, his rights, if any, in relation to the transfer 

1. Ins. by Act 1 of 2005, s. 14 (w.e.f. 12-10-2004). 

29 

 
                                                           
in any case where the mutual fund has refused to register the transfer of the security being units or 
other instruments issued by the mutual fund in the name of the transferee.] 

1[28.Act not to apply in certain cases.—(1) The provisions of this Act shall not apply to— 

(a)theGovernment, the Reserve Bank of India, any local authority or any corporation set up by a 
special law or any person who has effected any transaction with or through the agency of any such 
authority as is referred to in this clause; 

(b) any convertible bond or share warrant or any option or right in relation thereto, in so far as it 
entitles the person in whose favour any of the foregoing has been issued to obtain at his option from 
the  company  or  other  body  corporate  issuing  the  same  or  from  any  of  its  shareholders  or  duly 
appointed agents shares of the company or other body corporate whether by conversion of the bond or 
warrant or otherwise, on the basis of the price agreed upon when the same was issued. 

(2)Without  prejudice  to  the  provisions  contained  in  sub-section  (1),if  the  Central  Government  is 
satisfied  that  in  the  interests  of  trade  and  commerce  or  the  economic  development  of  the  country  it  is 
necessary  or  expedient  so  to  do,  it  may,  by  notification  in  the  Official  Gazette,  specify  any  class  of 
contracts as contracts to which this Act or any provision contained therein shall not apply, and also the 
conditions, limitations or restrictions, if any, subject to which it shall not so apply.] 

29.  Protection  of  action  taken  in  good  faith.—No  suit,  prosecution  or  other  legal  proceeding 
whatsoever shall lie in any court against the governing body or any member, office bearer or servant of 
any  recognised  stock  exchange  or  against  any  person  or  persons  appointed  under  sub-section  (1)  of 
section 11 for anything which is in good faith done or intended to be done in pursuance of this Act or of 
any rules or bye-laws made thereunder. 

2[29A.  power  to  delegate.—The  Central Government  may,  by  order  published  in  the  Official 
Gazette, direct that the powers (except the power under section 30) exercisable by it under any provision 
of this Act shall, in relation to such matters andsubjectto such conditions, if any, as may be specified in 
the order, be exercisable also by the Securities and Exchange Board of India or the Reserve Bank of India 
constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1034).] 

3[29B.  Powers  of  the  Securities  and  Exchange  Board  of  India  not  to  apply  to  International 
Financial Services Centre.—Notwithstanding anything contained in any other law for the time being in 
force, the powers exercisable by the Securities and Exchange Board of India under this Act,— 

(a)  shall  not  extend  to  an  International  Financial  Services  Centre  set  up  under  sub-section  (1) 

of section18 of the Special Economic Zones Act, 2005 (28 of 2005); 

(b)  shall  be  exercisable  by  the  International  Financial  Services  Centres  Authority  established 
under  sub-section  (1)  of section  4 of  the  International  Financial  Services  Centres  Authority  Act, 
2019,  

in so far as regulation of financial products, financial services and financial institutions that are permitted 
in the International Financial Services Centres are concerned.] 

30. Power to make rules.—(1) The Central Government may, by notification in the Official Gazette, 

make rules for the purpose of carrying into effect the objects of this Act. 

(2)  In  particular,  and  without  prejudice  to  the  generality  of  the  foregoing  power,  such  rules  may 

provide for,— 

(a) the manner in which applications may be made, the particulars which they should contain and 

the levy of a fee in respect of such applications; 

(b) the manner in which any inquiry for the purpose of recognising any stock exchange may be 
made, the conditions which may be imposed for the grant of such recognition, including conditions as 

1. Subs. by Act 49 of 1959, s. 3, for section 28 (w.e.f. 8-12-1959). 
2. Subs. by Act 31 of 1999, s. 9, for section 29A (w.e.f. 22-2-2000). 
3. Ins. by Act 50 of 2019, s. 33 and the second Schedule (w.e.f. 1-10-2020). 

30 

 
                                                           
to  the  admission  of  members  if  the  stock  exchange  concerned  is  to  be  the  only  recognised  stock 
exchange in the area; and the form in which such recognition shall be granted; 

(c) the  particulars  which should  be  contained in the periodical  returns  and  annual  reports to  be 

furnished to the Central Government; 

(d) the documents which should be maintained and preserved under section 6 and the periods for 

which they should be preserved; 

(e) the manner in which any inquiry by the governing body of a stock exchange shall be made 

under section 6; 

(f) the manner in which the bye-laws to be made or amended under this Act shall before being so 

made or amended be published for criticism; 

(g)  the  manner  in  which  applications  may  be  made  by  dealers  in  securities  for  licenses  under 
section 17, the fee payable in respect thereof and the period of such licences, the condition subject to 
which  licences  may  be  granted,  including  condition  relating  to  the  forms  which  may  be  used  in 
making contracts, or documents to be maintained by licensed dealers and the furnishing of periodical 
information  to  such  authority  as  may  be  specified  and  the  revocation  of  licences  for  breach  of 
conditions; 

1[(h) the requirements which shall be complied with— 

(A)  by  public  companies  for  the  purpose  of  getting  their  securities  listed  on  any  stock 

exchange; 

(B) by collective investment scheme for the purpose of getting their units listed on any stock 

exchange.] 

2[(ha)  the  grounds  on  which  the  securities  of  a  company  may  be  delisted  from  any  recognised 

stock exchange under sub-section (1) of section 21A; 

(hb) the form in which an appeal may be filed before the Securities Appellate Tribunal under sub-

section (2) of section 21A and the fees payable in respect of such appeal; 

(hc)  the  form  in  which  an  appeal  may  be  filed  before  the  Securities  Appellate  Tribunal  under 

section 22A and the fees payable in respect of such appeal; 

(hd) the manner of inquiry under sub-section (1) of section 23-I; 

(he)  the  form  in  which  an  appeal  may  be  filed  before  the  Securities  Appellate  Tribunal  under 

section 23L and the fees payable in respect of such appeal;] 

(i) any other matter which is to be or may be prescribed. 

3[(3)  Every  rule  made  under  this  Act shall  be  laid,  as soon  as  may  be  after it is made,  before  each 
House of Parliament, while it is in session, for a total period of thirty days which may be comprised in 
one session or in two or more successive sessions, and if, before the expiry of the session immediately 
following the session or the successive sessions aforesaid, both Houses agree in making any modification 
in the rule or both Houses agree that the rule should not be made, the rule shall thereafter have effect only 
in such modified form or be of no effect, as the case may be; so, however, that any such modification or 
annulment shall be without prejudice to the validity of anything previously done under that rule. 

4[30A.  Special  provisions  related  to  commodity  derivatives.—(1)  Nothing  contained  in  this  Act 

shall apply to non-transferable specific delivery contracts: 

Provided that no person shall organise or assist in organising or be a member of any association in 
any area to which the provisions of section 13 have been made applicable (other than a stock exchange) 

1 Subs. by Act 31 of 1999, s. 10, ibid., for clause (h) (w.e.f. 22-2-2000). 
2. Subs. by Act 1 of 2005, s. 15, for clause (ha) (w.e.f.12-10-2004). 
3. Subs. by s. 15, ibid., for sub-section (3) (w.e.f. 12-10-2004). 
4. Ins. by Act 20 of 2015, s. 134 (w.e.f. 14-5-2015). 

31 

 
                                                           
which  provides  facilities  for  the  performance  of  any  non-transferable  specific  delivery  contract  by  any 
party thereto without having to make or receive actual delivery to or from the other party to the contract 
or to or from any other party named in the contract. 

(2) Where in respect of any area, the provisions of section 13 have been made applicable in relation to 
commodity derivatives for the sale or purchase of any goods or class of goods, the Central Government 
may,  by  notification,  declare  that  in  the  said  area  or  any  part  thereof  as  may  be  specified  in  the 
notification  all  or  any  of  the  provisions  of  this  Act  shall  not  apply  to  transferable  specific  delivery 
contracts for the sale or purchase of the said goods or class of goods either generally, or to any class of 
such contracts in particular. 

(3)  Notwithstanding  anything  contained  in  sub-section  (1),  if  the  Central  Government  is  of  the 
opinion that in the interest of the trade or in the public interest it is expedient to regulate and control non-
transferable specific delivery contracts in any area, it may, by notification in the Official Gazette, declare 
that all or any of the provisions of this Act shall apply to such class or classes of non-transferable specific 
delivery  contracts  in  such  area  in  respect  of  such  goods  or  class  of  goods  as  may  be  specified  in  the 
notification,  and  may  also  specify  the  manner  in  which  and  the  extent  to  which  all  or  any  of  the  said 
provisions shall so apply.] 

1[30B.  Special  provisions  related  to  pooled  investment  vehicle.—(1)  Notwithstanding  anything 
contained in the Indian Trust Act, 1882 (2 of 1882) or in any other law for the time being in force or in 
any judgment, decree or order of any Court, Tribunal or any other authority, a pooled investment vehicle, 
whether  constituted  as  a  trust  or  otherwise,  and  registered  with  the  Securities  and  Exchange  Board  of 
India shall be eligible to borrow and issue debt securities in such manner and to such extent as may be 
specified under the regulations made by Securities and Exchange Board of India in this behalf. 

(2) Every pooled investment vehicle referred to in sub-section (1) shall, subject to the provisions of 
the  trust  deed,  be  permitted  to  provide  security  interest  to  lenders  in  terms  of  the  facility  documents 
entered into by such pooled investment vehicle. 

(3)  Where  any  pooled  investment  vehicle  referred  to  in  sub-section  (1)  defaults  in  repayment  of 
principal amount or payment of interest or any such amount due to the lender, the lender shall recover the 
defaulted amount and enforce security interest, if any, against the trust assets, by initiating proceedings 
against the trustee acting on behalf of such pooled investment vehicle in accordance with the terms and 
conditions specified in the facility documents: 

Provided  that  on  initiation  of  the  proceedings  against  the  trust  assets,  the  trustee  shall  not  be 

personally liable and his assets shall not be utilised towards recovery of such debt. 

(4) The  trust  assets,  which  remain  after  recovery  of defaulted  amount,  shall  be  remitted  to the  unit 

holders on proportionate basis.] 

2[31.Power  of  Securities  and  Exchange  Board  of  India  to  make  regulations.—(1)  Without 
prejudice to  the  provisions  contained  in section  30  of  the  Securities  and  Exchange  Board  of  India  Act, 
1992,  the  Securities  and  Exchange  Board  of  India,  may,  by  notification  in  the  Official  Gazette,  make 
regulations  consistent  with  the  provisions  of  this  Act  and  the  rules  made  thereunder  to  carry  out  the 
purposes of this Act. 

3[(2)  In  particular,  and  without  prejudice to the  generality  of the foregoing  power,  such regulations 

may provide for all or any of the following matters, namely:— 

(a) the manner, in which at least fifty-one per cent.of equity share capital of a recognised stock 
exchange is held within twelve months from the date of publication of the order under sub-section (7) 
of section 4B by the public other than the shareholders having trading rights under sub-section (8) of 
that section; 

(b) the eligibility criteria and other requirements under section 17A.] 

1. Ins. by Act 13 of 2021, s. 149 (w.e.f. 1-4-2021). 
2. Ins. by Act 1 of 2005, s. 16 (w.e.f. 12-10-2004). 
3. Subs. by Act 27 of 2007, s. 5, for sub-section (2) (w.e.f. 28-5-2007). 

32 

 
                                                           
1[(c)  the  terms  determined  by  the  Board  for  settlement  of  proceedings  under  sub-section  (2)  of 

section 23JA; 

(d) any other matter which is required to be, or may be, specified by regulations or in respect of 

which provision is to be made by regulations.] 

(3) Every regulation made under this Act shall be laid, as soon as may be after it is made, before each 
House of Parliament, while it is in session for a total period of thirty days which may be comprised in one 
session  or  in  two  or  more  successive  sessions,  and  if,  before  the  expiry  of  the  session  immediately 
following the session or the successive sessions aforesaid, both Houses agree in making any modification 
in  the  regulation  or  both  Houses  agree  that  the  regulation  should  not  be  made,  the  regulation  shall 
thereafter have effect only in such modified form or be of no effect, as the case may be; so, however, that 
any such modification or annulment shall be without prejudice to the validity of anything previously done 
under that regulation.] 

2[32. Validation of certain acts.—Any act or thing done or purporting to have been done under the 
principal Act, in respect of settlement of administrative and civil proceedings, shall, for all purposes, be 
deemed to be valid and effective as if the amendments made to the principal Act had been in force at all 
material times.] 

1. Ins. by Act 27 of 2014, s. 39 (w.e.f. 8-9-2014). 
2. Ins. by s. 40, ibid. (w.e.f. 8-9-2014). 

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